Comonotonic approximations for a generalized provisioning problem with application to optimal portfolio selection

In this paper we discuss multiperiod portfolio selection problems related to a speci…c provisioning problem. Our results are an extension of Dhaene et al. (2005), where optimal constant mix investment strategies are obtained in a provisioning and savings context, using an analytical approach based on the concept of comonotonicity. We derive convex bounds that can be used to estimate the provision to be set up at a speci…ed time in the future, to ensure that, after having paid all liabilities up to that moment, all liabilities from that moment on can be fulfilled, with a high probability. We give some interpretations of this additional reserve, and apply our results to optimal portfolio selection.