OPTIMAL ROBUST REINSURANCE CONTRACTS WITH INVESTMENT STRATEGY UNDER VARIANCE PREMIUM PRINCIPLE

Jiang, Wuyuan1; Yang, Zhaojun2,3

2023

10.3934/mcrf.2023001

Mathematical Control and Related Fields   Impact Factor & Quartile

2156-8472

2156-8499

This paper investigates the optimal robust proportional reinsurance contracts with investment in a liquid financial market under variance premium principle in a principal-agent framework. The surplus process of the insurer (agent) is assumed to follow an approximating compound Poisson risk process. Both the insurer and reinsurer (principal) are allowed to invest in a risk-free asset and a risky asset whose price process is governed by the constant elasticity of variance model. The insurer and reinsurer aim to maximize the expected exponential utility of terminal wealth. The reinsurer is ambiguity-averse and has deterministic ambiguity aversion preferences against the diffusion risk caused by the financial market and the approximated diffusion risk which comes from the claim process. The reinsurance price is described by the reinsurer's safety loading which can be decided by the optimal strategies of the insurer and the reinsurer. By utilizing stochastic optimal control principle and HJB (or HJBI) equations, the optimal (robust) proportional reinsurance-investment strategies and the corresponding value functions are obtained explicitly. Numerical examples are provided.

Reinsurance and investment CARA utility constant elasticity of variance model principal-agent problem model ambiguity

SCI

English

Corresponding

Key Project of National Natural Science Foundation of China[72031003] ; Natural Science Foundation of Hunan Province of China[2020JJ4329] ; Social Science Foundation of Hunan Province of China[18YBA198]

Mathematics

Mathematics, Applied ; Mathematics

WOS:000919672000001

AMER INST MATHEMATICAL SCIENCES-AIMS

Web of Science

1.Inst Sci & Technol, Dept Econ & Management Hunan, Yueyang 414006, Peoples R China
2.Southern Univ Sci & Technol, Dept Finance, Shenzhen 518055, Peoples R China
3.Natl Ctr Appl Math Shenzhen, Shenzhen 518055, Peoples R China

Jiang, Wuyuan,Yang, Zhaojun. OPTIMAL ROBUST REINSURANCE CONTRACTS WITH INVESTMENT STRATEGY UNDER VARIANCE PREMIUM PRINCIPLE[J]. Mathematical Control and Related Fields,2023.

Jiang, Wuyuan,&Yang, Zhaojun.(2023).OPTIMAL ROBUST REINSURANCE CONTRACTS WITH INVESTMENT STRATEGY UNDER VARIANCE PREMIUM PRINCIPLE.Mathematical Control and Related Fields.

Jiang, Wuyuan,et al."OPTIMAL ROBUST REINSURANCE CONTRACTS WITH INVESTMENT STRATEGY UNDER VARIANCE PREMIUM PRINCIPLE".Mathematical Control and Related Fields (2023).