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Time-consistent investment and reinsurance under relative performance concerns

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  • Duni Hu
  • Hailong Wang

Abstract

This article investigates the optimal time-consistent investment and reinsurance for two mean–variance insurance managers who take into account the relative performance by comparison to their peers. The unique time-consistent Nash equilibrium policies and the corresponding value functions are derived for asset concentration and diversification. No matter which case is chosen, when the two insurance managers are sensitive to each other’s wealth, they chase each other’s trading behaviors leading to under-reinsurance and overinvestment and lower utility relative to the standard case without relative concerns. The cost–benefit from asset diversification to asset concentration and economic implications of parameters are illustrated by numerical examples.

Suggested Citation

  • Duni Hu & Hailong Wang, 2018. "Time-consistent investment and reinsurance under relative performance concerns," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 47(7), pages 1693-1717, April.
    • Handle: RePEc:taf:lstaxx:v:47:y:2018:i:7:p:1693-1717
    DOI: 10.1080/03610926.2017.1324987
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    Cited by:

    1. 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.
    2. Helu Xiao & Tiantian Ren & Yanfei Bai & Zhongbao Zhou, 2019. "Time-Consistent Investment-Reinsurance Strategies for the Insurer and the Reinsurer under the Generalized Mean-Variance Criteria," Mathematics, MDPI, vol. 7(9), pages 1-25, September.
    3. Yanfei Bai & Zhongbao Zhou & Rui Gao & Helu Xiao, 2020. "Nash Equilibrium Investment-Reinsurance Strategies for an Insurer and a Reinsurer with Intertemporal Restrictions and Common Interests," Mathematics, MDPI, vol. 8(1), pages 1-26, January.

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