Surplus-Management

Surplus Management Surplus management is interpreted as optimization of the undercoverage risk of prudential institutions. The present contribution adds to the existing literature on surplus management the possibility to include a discretionary number of investments and restrictions thereon with stochastic benchmark yields. The model presented here is based on the portfolio theory of Markowitz (1952) and takes account especially of Roy’s concept of disaster probability (1952). Markowitz’s critical line algorithm (1956) is used for implementing investment restrictions