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The Optimal Strategy of Reinsurance-Investment Problem for an Insurer with Dynamic Income Under Stochastic Interest Rate

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  • Sheng Delei

    (Faculty of Applied Mathematics, Shanxi University of Finance & Economics, Taiyuan030006, China)

Abstract

This paper considers the reinsurance-investment problem for an insurer with dynamic income to balance the profit of insurance company and policy-holders. The insurer’s dynamic income is given by a net premium minus a dynamic reward budget item and the net premium is obtained according to the expected premium principle. Applying the stochastic control technique, a Hamilton-Jacobi-Bellman equation is established under stochastic interest rate model and the explicit solution is obtained by maximizing the insurer’s power utility of terminal wealth. In addition, the comparison with corresponding results under constant interest rate helps us to understand the role and influence of stochastic interest rates more in-depth.

Suggested Citation

  • Sheng Delei, 2016. "The Optimal Strategy of Reinsurance-Investment Problem for an Insurer with Dynamic Income Under Stochastic Interest Rate," Journal of Systems Science and Information, De Gruyter, vol. 4(3), pages 244-257, June.
    • Handle: RePEc:bpj:jossai:v:4:y:2016:i:3:p:244-257:n:5
    DOI: 10.21078/JSSI-2016-244-14
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    References listed on IDEAS

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