Optimal reinsurance-investment strategy with thinning dependence and delay factors under mean-variance framework

Yu Yuan, Xia Han, Zhibin Liang and Kam Chuen Yuen

European Journal of Operational Research, 2023, vol. 311, issue 2, 581-595

Abstract: In this paper, we study the optimal time-consistent reinsurance-investment problem for a risk model with the thinning-dependence structure. The insurer’s wealth process is described by a jump-diffusion risk model with two dependent classes of insurance business. We assume that the insurer is allowed to purchase per-loss reinsurance and invest its surplus in a financial market consisting of a risk-free asset and a risky asset. Also, the performance-related capital inflow or outflow feature is introduced, and the wealth process is modeled by a stochastic delay differential equation. Under the time-inconsistent mean-variance criterion, we derive the explicit optimal reinsurance-investment strategy and value function under the expected value premium principle as well as the variance premium principle by solving the extended Hamilton–Jacobi–Bellman (HJB) delay system. In particular, we prove the existence and uniqueness of the optimal strategy under the expected value premium principle. Finally, some numerical examples are provided to illustrate the influence of model parameters on the optimal strategy.

Keywords: Stochastic processes; Thinning-dependence; Delay factors; Extended Hamilton–Jacobi–Bellman (HJB) delay system; Time-consistent strategy (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:311:y:2023:i:2:p:581-595

DOI: 10.1016/j.ejor.2023.05.023

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