Advanced Modeling and Optimization

Abstract for Paper 6 of Volume 4, Number 1, 2002, pp. 65-82


The multi-period portofolio model with skewness for the property-liability insurance company.


Chunfeng Wang
School of Management,
Tianjin University,
Tianjin 300072, P.R.China
Jianlin Yang
School of Management,
Tianjin University,
Tianjin 300072, P.R.China

Abstract

The third moment (skewness) plays an important role in portofolio selection if the distribution of the rate of return of assets is asymmetric around the mean. In this paper, we establish a multi-period portofolio management model with skewness based on the portofolio problem of the property-liability insurance company. Our model is a multi-stage stochastic programming with recourse, which is extremely versatile, dealing with portofolio-balance constraints, cash-balance constraints, regulatory and institutional constraints, expected return constraint, variance of return constraint and objective function. A numerical example is given to illustrate the potential use of our multi-period portofolio model for the property-liability insurance company, and extensive sensitivity analysis is conducted for the multi-period model.