Economics at your fingertips  

Optimal proportional reinsurance and investment for stochastic factor models

Matteo Brachetta and Claudia Ceci

Papers from

Abstract: In this work we investigate the optimal proportional reinsurance-investment strategy of an insurance company which wishes to maximize the expected exponential utility of its terminal wealth in a finite time horizon. Our goal is to extend the classical Cramer-Lundberg model introducing a stochastic factor which affects the intensity of the claims arrival process, described by a Cox process, as well as the insurance and reinsurance premia. Using the classical stochastic control approach based on the Hamilton-Jacobi-Bellman equation we characterize the optimal strategy and provide a verification result for the value function via classical solutions of two backward partial differential equations. Existence and uniqueness of these solutions are discussed. Results under various premium calculation principles are illustrated and a new premium calculation rule is proposed in order to get more realistic strategies and to better fit our stochastic factor model. Finally, numerical simulations are performed to obtain sensitivity analyses.

New Economics Papers: this item is included in nep-dge, nep-ias, nep-knm, nep-ore and nep-upt
Date: 2018-06
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published in Insurance Mathematics and Economics (2019)

Downloads: (external link) Latest version (application/pdf)

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:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2019-04-04
Handle: RePEc:arx:papers:1806.01223