Optimal Investment and Proportional Reinsurance in a Regime-Switching Market Model under Forward Preferences

Katia Colaneri, Alessandra Cretarola and Benedetta Salterini
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Katia Colaneri: Department of Economics and Finance, University of Rome Tor Vergata, Via Columbia 2, 00133 Rome, Italy
Alessandra Cretarola: Department of Mathematics and Computer Science, University of Perugia, Via Luigi Vanvitelli, 1, 06123 Perugia, Italy
Benedetta Salterini: Department of Mathematics and Computer Science, University of Firenze, Viale Giovanni Battista Morgagni, 67/a, 50154 Florence, Italy

Mathematics, 2021, vol. 9, issue 14, 1-27

Abstract: In this paper, we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial frameworks are dependent since stock prices and insurance claims vary according to a common factor given by a continuous time finite state Markov chain. We construct the value function and we prove that it is a forward dynamic utility. Then, we characterize the optimal investment strategy and the optimal proportional level of reinsurance. We also perform numerical experiments and provide sensitivity analyses with respect to some model parameters.

Keywords: forward dynamic utility; optimal investment; optimal proportional reinsurance; stochastic factor-model; stochastic optimization (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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