Optimal reinsurance and investment in a diffusion model

Matteo Brachetta () and Hanspeter Schmidli ()
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Matteo Brachetta: University of Chieti-Pescara
Hanspeter Schmidli: University of Cologne

Decisions in Economics and Finance, 2020, vol. 43, issue 1, No 17, 361 pages

Abstract: Abstract We consider a diffusion approximation to an insurance risk model where an external driver models a stochastic environment. The insurer can buy reinsurance. Moreover, it is possible to invest in a financial market that depends on the insurance market. The financial market is also driven by the environmental process. Our goal is to maximise terminal expected utility. In particular, we consider the case of SAHARA utility functions. In the case of proportional and excess-of-loss reinsurance, we obtain explicit results.

Keywords: Optimal reinsurance; Optimal investment; Hamilton–Jacobi–Bellman equation; SAHARA utility; Proportional reinsurance; Excess-of-loss reinsurance (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10203-019-00265-8

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