Optimal investment and reinsurance strategies for an insurer with stochastic economic factor

Year 2023, , 197 - 208, 15.02.2023

Weiwei Shen

https://doi.org/10.15672/hujms.1025441

Cited By: 1

Abstract

This work considers optimal investment and reinsurance strategies for an insurer with stochastic economic factor. In our mathematical model, a risk-free asset and a risky asset are assumed to rely on a stochastic economic factor which is described by a diffusion process. We generalize the claim process to a compound Poisson process with the stochastic economic factor. Using expected utility maximization, we characterize the optimal strategy of investment-reinsurance under the power utility function. We use dynamic programming principle to derive the Hamilton–Jacobi–Bellman (HJB) equation. Then, by analysing the solution of the HJB equation, the optimal investment-reinsurance strategy is obtained and given in the verification theorem. Finally, sensitivity analysis is given to show the economic behavior of the optimal investment and reinsurance strategies.

Keywords

Stochastic control, investment-reinsurance strategy, stochastic economic factor, Lévy processes, HJB equation

Supporting Institution

National Natural Science Foundation of China； Guangzhou University

Project Number

National Natural Science Foundation of China (Grant No. 61973096)； Guangzhou University (2021GDJC-D03)

Thanks

This work was supported in part by the National Natural Science Foundation of China (Grant No. 61973096) and the postgraduate innovative ability training program of Guangzhou University (2021GDJC-D03).

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