Time-consistent investment-proportional reinsurance strategy with random coefficients for mean–variance insurers

Hao Wang, Rongming Wang and Jiaqin Wei

Insurance: Mathematics and Economics, 2019, vol. 85, issue C, 104-114

Abstract: In this study, we consider an insurer who manages her underlying risk by purchasing proportional reinsurance and investing in a financial market consisting of a risk-free bond and a risky asset. The objective of the insurer is to identify an investment–reinsurance strategy that minimizes the mean–variance cost function. We obtain a time-consistent open-loop equilibrium strategy and the corresponding efficient frontier in explicit form using two systems of backward stochastic differential equations. Furthermore, we apply our results to Vasiček’s stochastic interest rate model and Heston’s stochastic volatility model. In both cases, we obtain a closed-form solution.

Keywords: Mean–variance; Equilibrium strategy; Time-consistency; Stochastic interest rate; Stochastic volatility (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:85:y:2019:i:c:p:104-114

DOI: 10.1016/j.insmatheco.2019.01.002

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