✦ LIBER ✦

Liquid asset allocation using “newsvendor” models with convex shortage costs

✍ Scribed by Yigal Gerchak; Shaun Wang

Publisher: Elsevier Science
Year: 1997
Tongue: English
Weight: 305 KB
Volume: 20
Category: Article
ISSN: 0167-6687
DOI: 10.1016/s0167-6687(96)00018-2

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✦ Synopsis

In this article we use a generalized newsvendor model to determine the optimal liquid asset allocation for insurance risks by an insurance firm. The model studied uses a power function for the liquidation costs. In the case of quadratic liquidation costs, we investigate the impact of risk-pooling and risk-sharing on the optimal liquid asset allocation.