EconPapers    
Economics at your fingertips  
 

Optimal reinsurance and investment problem in a defaultable market

Jianjing Ma, Guojing Wang and George Xianzhi Yuan

Communications in Statistics - Theory and Methods, 2018, vol. 47, issue 7, 1597-1614

Abstract: This article investigates the optimal reinsurance and investment problem involving a defaultable security. The insurer can purchase reinsurance and allocate his wealth among three financial securities: a money account, a stock, and a defaultable corporate bond. The objective of the insurer is to maximize the expected exponential utility of terminal wealth. Using techniques of stochastic control theory, we derive the corresponding Hamilton–Jacobi–Bellman equation and decompose the original optimization problem into a predefault case and a postdefault case. Explicit expressions for optimal strategies and the corresponding value functions are derived, and the verification theorem is given. Finally, we present numerical examples to illustrate our results.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/03610926.2017.1321772 (text/html)
Access to full text is restricted to subscribers.

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:taf:lstaxx:v:47:y:2018:i:7:p:1597-1614

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/lsta20

DOI: 10.1080/03610926.2017.1321772

Access Statistics for this article

Communications in Statistics - Theory and Methods is currently edited by Debbie Iscoe

More articles in Communications in Statistics - Theory and Methods from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2021-07-24
Handle: RePEc:taf:lstaxx:v:47:y:2018:i:7:p:1597-1614