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Time-consistent investment and reinsurance strategies for mean-variance insurers with relative performance concerns under the Heston model

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  • Zhu, Huainian
  • Cao, Ming
  • Zhang, Chengke

Abstract

This paper considers the optimal time-consistent investment and reinsurance strategies for two mean-variance insurers subject to the relative performance concerns. Each insurer can purchase a reinsurance protection and invest in a financial market consisted of one risk-free asset and one risky asset. We assume that the price process of risky asset is driven by the Heston model. The main objective of each insurer is to choose a investment and reinsurance strategy such that the mean and variance of his relative terminal wealth with respect to that of his competitor is maximized and minimized, simultaneously. By applying the stochastic control theory, closed-form expressions for the equilibrium investment-reinsurance strategies and corresponding value functions are derived. Finally, we provide some numerical studies and draw some economic interpretations.

Suggested Citation

  • Zhu, Huainian & Cao, Ming & Zhang, Chengke, 2019. "Time-consistent investment and reinsurance strategies for mean-variance insurers with relative performance concerns under the Heston model," Finance Research Letters, Elsevier, vol. 30(C), pages 280-291.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:280-291
    DOI: 10.1016/j.frl.2018.10.009
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    Cited by:

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    2. Li, Peng & Zhou, Ming & Yao, Dingjun, 2022. "Optimal time for the excess of loss reinsurance with fixed costs," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 466-475.
    3. Yu-Jui Huang & Li-Hsien Sun, 2023. "Partial Information Breeds Systemic Risk," Papers 2312.04045, arXiv.org, revised Dec 2023.
    4. Zilan Liu & Yijun Wang & Ya Huang & Jieming Zhou, 2022. "Optimal Time-Consistent Investment and Premium Control Strategies for Insurers with Constraint under the Heston Model," Mathematics, MDPI, vol. 10(7), pages 1-22, March.

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