@inbook{4b0c399a45be4d5a8973f503f57a862d,
title = "Optimal life insurance and annuity demand with jump diffusion and regime switching",
abstract = "Classic Merton optimal life-cycle portfolio and consumption models are based on diffusion models for risky assets. In this paper, we extend the Richard{\textquoteright}s (1975) optimal life-cycle model by allowing jumps and regime switching in the diffusion of risky assets. We develop a system of paired Hamilton–Jacobi–Bellman (HJB) equations. Using numerical methods, we obtain the results of agents{\textquoteright} behaviour. Our findings are that agents would be more conservative in consumption and annuitisation when the economic environment is more volatile and the bequest motive is stronger. However, under certain conditions, agents might increase their exposure to risky assets.",
keywords = "Stochastic optimal control, Richard{\textquoteright}s model, Optimal investment, Jumps, Regime switching",
author = "Jinhui Zhang and Sachi Purcal and Jiaqin Wei",
year = "2022",
doi = "10.1007/978-3-030-85254-2_31",
language = "English",
isbn = "9783030852535",
series = "Contributions to Economics",
publisher = "Springer, Springer Nature",
pages = "515--530",
editor = "Terzioğlu, {M. Kenan}",
booktitle = "Advances in econometrics, operational research, data science and actuarial studies",
address = "United States",
}