Optimal mean–variance investment and reinsurance problem for an insurer with stochastic volatility

Zhongyang Sun () and Junyi Guo ()
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Zhongyang Sun: Nankai University
Junyi Guo: Nankai University

Mathematical Methods of Operations Research, 2018, vol. 88, issue 1, No 3, 59-79

Abstract: Abstract This paper considers an optimal investment and reinsurance problem for an insurer under the mean–variance criterion. The stochastic volatility of the stock price is modeled by a Cox-Ingersoll-Ross (CIR) process. By applying a backward stochastic differential equation (BSDE) approach, we obtain a BSDE related to the underlying investment and reinsurance problem. Then solving the BSDE leads to closed-form expressions for both the efficient frontier and the efficient strategy. In the end, numerical examples are presented to analyze the economic behavior of the efficient frontier.

Keywords: Mean–variance criterion; CIR process; Backward stochastic differential equation; Efficient frontier; Efficient strategy; Primary 91B30; Secondary 91G10; 91G80 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s00186-017-0628-7

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