Journal article

Optimal consumption–investment and life-insurance purchase strategy for couples with correlated lifetimes

J Wei, X Cheng, Z Jin, H Wang

Insurance: Mathematics and Economics | Elsevier | Published : 2020

Abstract

This paper presents a technique to solve the problem where a couple aims to optimize their consumption, investment, and life-insurance purchasing strategies, thereby maximizing their family objective until retirement. Assumed correlated lifetimes of the two wage earners are modeled by using both the copula and common-shock models. Subsequently, closed-form solutions are obtained for determination of the optimal strategies in both the copula and a special case of the common-shock models. As observed, use of the copula model is more advantageous in its provision of closed-form strategies and ability to distinguish mortality impacts. The optimization problem considered herein is investigated un..

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University of Melbourne Researchers

Grants

Awarded by National Natural Science Foundation of China


Awarded by Research Grants Council, Hong Kong of the Hong Kong Special Administrative Region


Funding Acknowledgements

We are grateful to the handing editor and two anonymous referees for their insightful comments and suggestions, which have led to significant improvements. This work was supported by the National Natural Science Foundation of China under Grant nos. 11601157 and 11601320, the Research Grants Council, Hong Kong of the Hong Kong Special Administrative Region under Grant no. 17330816, and the Faculty Research Grant received from the University of Melbourne, Australia.