An optimal insurance strategy for an individual under an intertemporal equilibrium

作者：Zhou, Chunyang^*; Wu, Chongfeng; Zhang, Shengping; Huang, Xuejun

来源：Insurance: Mathematics and Economics , 2008, 42(1): 255-260.

DOI：10.1016/j.insmatheco.2007.02.005

• optimal insurance strategy
• put option
• expected utility

In this paper, we discuss how a risk-averse individual under an intertemporal equilibrium chooses his/her optimal insurance strategy to maximize his/her expected utility of terminal wealth. It is shown that the individual's optimal insurance strategy actually is equivalent to buying a put option, which is written on his/her holding asset with a proper strike price. Since the cost of avoiding risk can be seen as a risk measure, the put option premium can be considered as a reasonable risk measure. Jarrow [Jarrow, R., 2002. Put option premiums and coherent risk measures. Math. Finance 12, 135-142] drew this conclusion with an axiomatic approach, and we verify it by solving the individual's optimal insurance problem.

• 出版日期2008-2
• 单位上海交通大学