APPLICATION OF SAFETY FIRST RATIO IN PORTFOLIO OPTIMIZATION FOR THE INSURANCE INDUSTRY USING PARTICLE SWARM OPTIMIZATION
This study aims to address the complexity of portfolio optimization in the insurance industry by considering constraints such as the proportion regulations set by the Financial Services Authority (OJK), buy-in threshold, and roundlot constraints. The study explores the application of Particle Swa...
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| Main Author: | |
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/81578 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | This study aims to address the complexity of portfolio optimization in the insurance
industry by considering constraints such as the proportion regulations set by the Financial
Services Authority (OJK), buy-in threshold, and roundlot constraints. The study
explores the application of Particle Swarm Optimization (PSO) method in determining
optimal asset allocation that maximizes the safety first ratio. The safety first ratio prioritizes
the ratio between the difference in returns and the expected minimum return,
considering the associated risks, which is crucial for managing portfolio risk in the insurance
industry. The financial instruments considered in this study are stocks, bonds,
and deposits. The results indicate that optimizing the safety first ratio model using PSO
method can generate optimal asset allocation and demonstrate good performance in
addressing complex optimization problems. Furthermore, portfolio optimization results
using the safety first ratio were also evaluated using the Markowitz efficient frontier
model, showing that the solutions align with the optimal portfolios according to the
Markowitz model, thus providing additional validation of the approach used. |
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