Dynamic mean-variance problem with constrained risk control for the insurers

Lihua Bai () and Huayue Zhang ()

Mathematical Methods of Operations Research, 2008, vol. 68, issue 1, 205 pages

Abstract: In this paper, we study optimal reinsurance/new business and investment (no-shorting) strategy for the mean-variance problem in two risk models: a classical risk model and a diffusion model. The problem is firstly reduced to a stochastic linear-quadratic (LQ) control problem with constraints. Then, the efficient frontiers and efficient strategies are derived explicitly by a verification theorem with the viscosity solutions of Hamilton–Jacobi–Bellman (HJB) equations, which is different from that given in Zhou et al. (SIAM J Control Optim 35:243–253, 1997). Furthermore, by comparisons, we find that they are identical under the two risk models. Copyright Springer-Verlag 2008

Keywords: Mean-variance; Efficient frontier; Efficient strategy; Hamilton–Jacobi– Bellman equation; Riccati equation; Viscosity solution; Lagrange multiplier; 93E20; 91B30 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (43)

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DOI: 10.1007/s00186-007-0195-4

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