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Optimal non-proportional reinsurance control and stochastic differential games

  • Taksar, Michael
  • Zeng, Xudong
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    We study stochastic differential games between two insurance companies who employ reinsurance to reduce risk exposure. We consider competition between two companies and construct a single payoff function of two companies' surplus processes. One company chooses a dynamic reinsurance strategy in order to maximize the payoff function while its opponent is simultaneously choosing a dynamic reinsurance strategy so as to minimize the same quantity. We describe the Nash equilibrium of the game and prove a verification theorem for a general payoff function. For the payoff function being the probability that the difference between two surplus reaches an upper bound before it reaches a lower bound, the game is solved explicitly.

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    File URL: http://www.sciencedirect.com/science/article/B6V8N-513VRD2-1/2/e5e20b669210baf295560499efcc46ca
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    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 48 (2011)
    Issue (Month): 1 (January)
    Pages: 64-71

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    Handle: RePEc:eee:insuma:v:48:y:2011:i:1:p:64-71
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505554

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    1. repec:ner:tilbur:urn:nbn:nl:ui:12-77120 is not listed on IDEAS
    2. Zeng, Xudong, 2010. "Optimal reinsurance with a rescuing procedure," Insurance: Mathematics and Economics, Elsevier, vol. 46(2), pages 397-405, April.
    3. repec:spr:compst:v:51:y:2000:i:1:p:1-42 is not listed on IDEAS
    4. Suijs, J.P.M. & De Waegenaere, A.M.B. & Borm, P.E.M., 1998. "Stochastic cooperative games in insurance and reinsurance," Other publications TiSEM 01f181bb-862a-4712-9204-9, Tilburg University, School of Economics and Management.
    5. Hipp, Christian & Taksar, Michael, 2010. "Optimal non-proportional reinsurance control," Insurance: Mathematics and Economics, Elsevier, vol. 47(2), pages 246-254, October.
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