A characterization of equilibrium strategies in continuous-time mean–variance problems for insurers

Ishak Alia, Farid Chighoub and Ayesha Sohail

Insurance: Mathematics and Economics, 2016, vol. 68, issue C, 212-223

Abstract: In this work, we study the equilibrium reinsurance/new business and investment strategy for mean–variance insurers with constant risk aversion. The insurers are allowed to purchase proportional reinsurance, acquire new business and invest in a financial market, where the surplus of the insurers is assumed to follow a jump–diffusion model and the financial market consists of one riskless asset and a multiple risky assets whose price processes are driven by Poisson random measures and independent Brownian motions. By using a version of the stochastic maximum principle approach, we characterize the open loop equilibrium strategies via a stochastic system which consists of a flow of forward–backward stochastic differential equations (FBSDEs in short) and an equilibrium condition. Then by decoupling the flow of FSBDEs, an explicit representation of an equilibrium solution is derived as well as its corresponding objective function value.

Keywords: Time inconsistency; Mean–variance criterion; Investment–reinsurance strategy; Insurer; Equilibrium strategy; Forward–backward stochastic differential equation (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:68:y:2016:i:c:p:212-223

DOI: 10.1016/j.insmatheco.2016.03.009

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