1. Optimal investment-reinsurance strategy in the correlated insurance and financial markets
- Author
-
Caixia Geng and Xiaoyu Xing
- Subjects
Reinsurance ,Control and Optimization ,Applied Mathematics ,Strategy and Management ,Financial market ,Asset allocation ,010103 numerical & computational mathematics ,01 natural sciences ,Atomic and Molecular Physics, and Optics ,010104 statistics & probability ,Exponential utility ,Constant elasticity of variance model ,Bellman equation ,Value (economics) ,Economics ,Econometrics ,Asset (economics) ,0101 mathematics ,Business and International Management ,Electrical and Electronic Engineering - Abstract
Within the correlated insurance and financial markets, we consider the optimal reinsurance and asset allocation strategies. In this paper, the risk asset is assumed to follow a general continuous diffusion process driven by a Brownian motion, which correlates to the insurer's surplus process. We propose a novel approach to derive the optimal investment-reinsurance strategy and value function for an exponential utility function. To illustrate this, we show how to derive the explicit closed strategies and value functions when the risk asset is the CEV model, 3/2 model and Merton's IR model respectively.
- Published
- 2022
- Full Text
- View/download PDF