Minimizing the penalized goal-reaching probability with multiple dependent risks

Ying Huang and Jun Peng

Statistics & Probability Letters, 2025, vol. 217, issue C

Abstract: We consider a robust optimal investment and reinsurance problem with multiple dependent risks for an Ambiguity-Averse Insurer (AAI), who wishes to minimize the probability that the value of the wealth process reaches a low barrier before a high goal. We assume that the insurer can purchase per-loss reinsurance for every class of insurance business and invest its surplus in a risk-free asset and a risky asset. Using the technique of stochastic control theory and solving the associated Hamilton-Jacobi-Bellman (HJB) equation, we derive the robust optimal investment-reinsurance strategy and the associated value function. We conclude that the robust optimal investment-reinsurance strategy coincides with the one without model ambiguity, but the value function differs. We also illustrate our results by numerical examples.

Keywords: Goal-reaching probability; Investment; Multiple dependent risks; Per-loss reinsurance; Robust (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.spl.2024.110287

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