Human Capital, Asset Allocation, and Life Insurance

Financial planners and advisors have recently started to recognize that human capital must be taken into account when building optimal portfolios for individual investors. But human capital is not just another pre-endowed asset class that must be included as part of the portfolio frontier. An investor's human capital contains a unique mortality risk, which is the loss of all future income and wages in the unfortunate event of premature death. However, life insurance in its various guises and incarnations can hedge against this mortality risk. Thus, human capital affects both the optimal asset allocation and the optimal demand for life insurance. Yet historically, asset allocation and life insurance decisions have consistently been analyzed separately both in theory and practice. In this paper, we develop a unified framework based on human capital in order to enable individual investors to make both decisions jointly. We investigate the impact of the magnitude of human capital, its volatility, and its correlation with other assets as well as bequest preferences and subjective survival probabilities on the optimal portfolio of life insurance and traditional asset classes. We do this through five case studies that implement our model. Indeed, our analysis validates some intuitive rules of thumb but provides additional results that are not immediately obvious.Human Capital, Asset Allocation, Life Insurance

Stability analysis of riverbanks with a dual structure under water–root–soil coupling

The collapse mechanism of dual-structure vegetation riverbanks at different water levels is unclear. A method for calculating the critical collapse width of a dual-structure vegetation bank under different failure modes that consider the variations in river and groundwater levels and the influence of vegetation roots is proposed. Combined with the influence of flow lateral erosion and slope toe accumulation, a calculation model of riverbank stability was established. The results show that shear failure is the main failure mode when the cohesive soil layer on a dual-structure bank is thick, and the critical collapse width of the bank with root soil is higher than that of the soil bank. The critical collapse width of the bank varied with the water level during different water level periods. Compared with a soil riverbank, a rooted soil riverbank can significantly prolong the bank collapse time. The collapse width of a soil bank without vegetation roots is smaller than that of a rooted soil bank, and the cumulative collapse width is related to calculation time. The greater the thickness of rooted soil, the slower the decay rate of bank stability under water flow erosion. HIGHLIGHTS The collapse mechanism of riverbanks with a dual structure under the influence of water level and vegetation was revealed.; The collapse process analysis and stability calculation model of dual-structure bank with vegetation were established.; The stability analysis and prediction of the dual-structure bank with vegetation in the lower reaches of the Yangtze River were carried out.