Worst-Case Investment and Reinsurance Optimization for an Insurer under Model Uncertainty

Xiangbo Meng, Ximin Rong, Lidong Zhang and Ziping Du

Discrete Dynamics in Nature and Society, 2016, vol. 2016, 1-8

Abstract:

In this paper, we study optimal investment-reinsurance strategies for an insurer who faces model uncertainty. The insurer is allowed to acquire new business and invest into a financial market which consists of one risk-free asset and one risky asset whose price process is modeled by a Geometric Brownian motion. Minimizing the expected quadratic distance of the terminal wealth to a given benchmark under the “worst-case” scenario, we obtain the closed-form expressions of optimal strategies and the corresponding value function by solving the Hamilton-Jacobi-Bellman (HJB) equation. Numerical examples are presented to show the impact of model parameters on the optimal strategies.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:9693419

DOI: 10.1155/2016/9693419

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