Optimal Reinsurance and Investment Strategy for an Insurer in a Model with Delay and Jumps

Qiang Zhang and Ping Chen
Additional contact information
Ping Chen: Nanjing University of Science and Technology

Methodology and Computing in Applied Probability, 2020, vol. 22, issue 2, 777-801

Abstract: Abstract This paper studies an optimal excess-of-loss reinsurance and investment problem in a model with delay and jumps for an insurer, who can purchase excess-of-loss reinsurance and invest his surplus in a risk-free asset and a risky asset whose price is governed by a jump-diffusion model. The insurer’s surplus is described by a diffusion model, which is an approximation of the classical compound Poisson risk model. In particular, the wealth process of the insurer is modeled by a stochastic differential delay equation via introducing the performance-related capital inflow or outflow. Under the criterion for maximizing the expected exponential utility of the combination of terminal wealth and average performance wealth, optimal strategy and the corresponding value function are obtained by using the dynamic programming approach. Finally, numerical examples are provided to show the effects of model parameters on the optimal strategies and illustrate the economic meaning.

Keywords: Excess-of-loss reinsurance; Jump-diffusion model; Stochastic differential delay equation; Exponential utility; Dynamic programming approach; 60H30; 93E20 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s11009-019-09734-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:metcap:v:22:y:2020:i:2:d:10.1007_s11009-019-09734-4

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/11009

DOI: 10.1007/s11009-019-09734-4

Access Statistics for this article

Methodology and Computing in Applied Probability is currently edited by Joseph Glaz

More articles in Methodology and Computing in Applied Probability from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().