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On mean-variance optimal reinsurance-investment strategies in dynamic contagion claims models

Author

Listed:
  • Marina Santacroce

    (Finanziarie ed Attuariali, Università Cattolica del Sacro Cuore, Dipartimento di Matematica per le Scienze Economiche)

  • Barbara Trivellato

    (Dipartimento di Scienze Matematiche “G.L. Lagrange”, Politecnico di Torino)

Abstract

We consider the reinsurance-investment problem under the mean variance criterion in a dynamic contagion model that takes into account self and externally excited claim clustering effects. We find explicit time-consistent reinsurance-investment strategies for a generalized proportional contract in which only losses above a certain level are reinsured. This greater flexibility in the contract mitigates the possible drawback of the primary insurer ceding too much at the expense of profitability, while still ensuring that the higher risks are shared with the reinsurance counterparty.

Suggested Citation

  • Marina Santacroce & Barbara Trivellato, 2025. "On mean-variance optimal reinsurance-investment strategies in dynamic contagion claims models," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 48(2), pages 1509-1526, December.
    • Handle: RePEc:spr:decfin:v:48:y:2025:i:2:d:10.1007_s10203-024-00475-9
    DOI: 10.1007/s10203-024-00475-9
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    References listed on IDEAS

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    1. Cao, Jingyi & Landriault, David & Li, Bin, 2020. "Optimal reinsurance-investment strategy for a dynamic contagion claim model," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 206-215.
    2. Zeng, Yan & Li, Zhongfei, 2011. "Optimal time-consistent investment and reinsurance policies for mean-variance insurers," Insurance: Mathematics and Economics, Elsevier, vol. 49(1), pages 145-154, July.
    3. Matteo Brachetta & Giorgia Callegaro & Claudia Ceci & Carlo Sgarra, 2024. "Optimal reinsurance via BSDEs in a partially observable model with jump clusters," Finance and Stochastics, Springer, vol. 28(2), pages 453-495, April.
    4. Li, Danping & Li, Dongchen & Young, Virginia R., 2017. "Optimality of excess-loss reinsurance under a mean–variance criterion," Insurance: Mathematics and Economics, Elsevier, vol. 75(C), pages 82-89.
    5. Danping Li & Dongchen Li & Virginia R. Young, 2017. "Optimality of Excess-Loss Reinsurance under a Mean-Variance Criterion," Papers 1703.01984, arXiv.org, revised Mar 2017.
    6. Tomas Björk & Mariana Khapko & Agatha Murgoci, 2017. "On time-inconsistent stochastic control in continuous time," Finance and Stochastics, Springer, vol. 21(2), pages 331-360, April.
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