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Journal of Systems Science and Complexity

, Volume 28, Issue 6, pp 1326–1343 | Cite as

Optimal investment problem for an insurer and a reinsurer

  • Danping LiEmail author
  • Ximin Rong
  • Hui Zhao
Article

Abstract

This paper studies the optimal investment problem for an insurer and a reinsurer. The basic claim process is assumed to follow a Brownian motion with drift and the insurer can purchase proportional reinsurance from the reinsurer. The insurer and the reinsurer are allowed to invest in a risk-free asset and a risky asset. Moreover, the authors consider the correlation between the claim process and the price process of the risky asset. The authors first study the optimization problem of maximizing the expected exponential utility of terminal wealth for the insurer. Then with the optimal reinsurance strategy chosen by the insurer, the authors consider two optimization problems for the reinsurer: The problem of maximizing the expected exponential utility of terminal wealth and the problem of minimizing the ruin probability. By solving the corresponding Hamilton-Jacobi-Bellman equations, the authors derive the optimal reinsurance and investment strategies, explicitly. Finally, the authors illustrate the equality of the reinsurer’s optimal investment strategies under the two cases.

Keywords

Hamilton-Jacobi-Bellman equation optimal reinsurance and investment strategies proportional reinsurance ruin probability utility maximization 

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Copyright information

© Institute of Systems Science, Academy of Mathematics and Systems Science, CAS and Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.School of ScienceTianjin UniversityTianjinChina
  2. 2.Center for Applied MathematicsTianjin UniversityTianjinChina

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