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Optimal reinsurance/investment problems for general insurance models

Listed author(s):
  • Yuping Liu
  • Jin Ma
Registered author(s):

    In this paper the utility optimization problem for a general insurance model is studied. The reserve process of the insurance company is described by a stochastic differential equation driven by a Brownian motion and a Poisson random measure, representing the randomness from the financial market and the insurance claims, respectively. The random safety loading and stochastic interest rates are allowed in the model so that the reserve process is non-Markovian in general. The insurance company can manage the reserves through both portfolios of the investment and a reinsurance policy to optimize a certain utility function, defined in a generic way. The main feature of the problem lies in the intrinsic constraint on the part of reinsurance policy, which is only proportional to the claim-size instead of the current level of reserve, and hence it is quite different from the optimal investment/consumption problem with constraints in finance. Necessary and sufficient conditions for both well posedness and solvability will be given by modifying the ``duality method'' in finance and with the help of the solvability of a special type of backward stochastic differential equations.

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    Paper provided by in its series Papers with number 0908.4538.

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    Date of creation: Aug 2009
    Publication status: Published in Annals of Applied Probability 2009, Vol. 19, No. 4, 1495-1528
    Handle: RePEc:arx:papers:0908.4538
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