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Optimal reinsurance–investment policies for insurers with mispricing under mean-variance criterion

Author

Listed:
  • Yijun Wang
  • Yingchun Deng
  • Ya Huang
  • Jieming Zhou
  • Xuyan Xiang

Abstract

This article studies the optimal mean-variance reinsurance-investment selection for insurers with mispricing. Assuming that insurers wish to purchase proportional/excess-of-loss reinsurance and exchange among a risk-free asset, a pair of mispriced stocks, and the market index to maximize their return and minimize the risk. Using the approach developed by Björk, Khapko, and Murgoci (Finance and Stochastics 2017; 21 (2):331–60), we derive the equilibrium strategies and the corresponding equilibrium value functions under two cases through solving the extended Hamilton–Jacobi–Bellman system. Moreover, numerical analyses are provided to illustrate our results.

Suggested Citation

  • Yijun Wang & Yingchun Deng & Ya Huang & Jieming Zhou & Xuyan Xiang, 2022. "Optimal reinsurance–investment policies for insurers with mispricing under mean-variance criterion," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 51(16), pages 5653-5680, August.
    • Handle: RePEc:taf:lstaxx:v:51:y:2022:i:16:p:5653-5680
    DOI: 10.1080/03610926.2020.1844239
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