A multi-agent incomplete equilibrium model and its applications to reinsurance pricing and life-cycle investment (Forthcoming in "Insurance: Mathematics and Economics")

Keisuke Kizaki, Taiga Saito and Akihiko Takahashi
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Keisuke Kizaki: Life Insurance Analytics Department, Mizuho-DL Financial Technology Co., Ltd.,
Taiga Saito: School of Commerce, Senshu University
Akihiko Takahashi: Graduate School of Economics, The University of Tokyo

No CARF-F-576, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper develops an incomplete equilibrium model with multi-agents' different risk attitudes and heterogeneous income/payout pro les. Particularly, we apply its concrete and computationally tractable model to reinsurance derivatives pricing and life-cycle investment, which are important for insurance and asset management companies in practice. In numerical experiments, we explicitly obtain endogenously determined expected returns of the risky asset in equilibrium, agents' speci c reinsurance prices with their stochastic discount factors (SDF) and optimal life-cycle trading strategies. Moreover, we investigate how each agent's degree of risk aversion and income/payout pro le, and correlations between an insurance or economic factor and the risky asset price affect reinsurance claims pricing and optimal portfolios in life-cycle investment.

Pages: 29
Date: 2023-11
New Economics Papers: this item is included in nep-rmg
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