The Maximization of Wealth with Loss Aversion for an Insurance Company

The insurance company will invest the initial wealth on risk-free assets and risky assets to get the optimal portfolio. Investment decision maker is assumed to be loss aversion. The insurance company want to maximize the expected utility of wealth. In recent years, some researchers interested in optimal investment for a general insurance company. In this paper, the insurance company have a dynamic maximization model, so we translate the dynamic maximization model into an equivalent static optimization model with martingale method. Furthermore we solve the static optimization through Lagrange multiplier.