Optimal reinsurance–investment policies for insurers with mispricing under mean-variance criterion

Yijun Wang, Yingchun Deng, Ya Huang, Jieming Zhou and Xuyan Xiang

Communications in Statistics - Theory and Methods, 2022, vol. 51, issue 16, 5653-5680

Abstract: This article studies the optimal mean-variance reinsurance-investment selection for insurers with mispricing. Assuming that insurers wish to purchase proportional/excess-of-loss reinsurance and exchange among a risk-free asset, a pair of mispriced stocks, and the market index to maximize their return and minimize the risk. Using the approach developed by Björk, Khapko, and Murgoci (Finance and Stochastics 2017; 21 (2):331–60), we derive the equilibrium strategies and the corresponding equilibrium value functions under two cases through solving the extended Hamilton–Jacobi–Bellman system. Moreover, numerical analyses are provided to illustrate our results.

Date: 2022
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DOI: 10.1080/03610926.2020.1844239

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