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Article: Optimal dynamic reinsurance with dependent risks: variance premium principle
Title | Optimal dynamic reinsurance with dependent risks: variance premium principle |
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Authors | |
Keywords | Brownian motion common shock compound Poisson process diffusion process exponential utility Hamilton–Jacobi–Bellman equation proportional reinsurance |
Issue Date | 2016 |
Publisher | Taylor & Francis Scandinavia. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/03461238.asp |
Citation | Scandinavian Actuarial Journal, 2016, v. 2016 n. 1, p. 18-36 How to Cite? |
Abstract | In this paper, we consider the optimal proportional reinsurance strategy in a risk model with two dependent classes of insurance business, where the two claim number processes are correlated through a common shock component. Under the criterion of maximizing the expected exponential utility with the variance premium principle, we adopt a nonstandard approach to examining the existence and uniqueness of the optimal reinsurance strategy. Using the technique of stochastic control theory, closed-form expressions for the optimal strategy and the value function are derived for the compound Poisson risk model as well as for the Brownian motion risk model. From the numerical examples, we see that the optimal results for the compound Poisson risk model are very different from those for the diffusion model. The former depends not only on the safety loading, time, and the interest rate, but also on the claim size distributions and the claim number processes, while the latter depends only on the safety loading, time, and the interest rate. |
Persistent Identifier | http://hdl.handle.net/10722/199242 |
ISSN | 2023 Impact Factor: 1.6 2023 SCImago Journal Rankings: 0.967 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Liang, Z | - |
dc.contributor.author | Yuen, KC | - |
dc.date.accessioned | 2014-07-22T01:09:56Z | - |
dc.date.available | 2014-07-22T01:09:56Z | - |
dc.date.issued | 2016 | - |
dc.identifier.citation | Scandinavian Actuarial Journal, 2016, v. 2016 n. 1, p. 18-36 | - |
dc.identifier.issn | 0346-1238 | - |
dc.identifier.uri | http://hdl.handle.net/10722/199242 | - |
dc.description.abstract | In this paper, we consider the optimal proportional reinsurance strategy in a risk model with two dependent classes of insurance business, where the two claim number processes are correlated through a common shock component. Under the criterion of maximizing the expected exponential utility with the variance premium principle, we adopt a nonstandard approach to examining the existence and uniqueness of the optimal reinsurance strategy. Using the technique of stochastic control theory, closed-form expressions for the optimal strategy and the value function are derived for the compound Poisson risk model as well as for the Brownian motion risk model. From the numerical examples, we see that the optimal results for the compound Poisson risk model are very different from those for the diffusion model. The former depends not only on the safety loading, time, and the interest rate, but also on the claim size distributions and the claim number processes, while the latter depends only on the safety loading, time, and the interest rate. | - |
dc.language | eng | - |
dc.publisher | Taylor & Francis Scandinavia. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/03461238.asp | - |
dc.relation.ispartof | Scandinavian Actuarial Journal | - |
dc.rights | This is an Accepted Manuscript of an article published by Taylor & Francis in Scandinavian Actuarial Journal on 07 Mar 2014, available online: http://www.tandfonline.com/doi/full/10.1080/03461238.2014.892899 | - |
dc.subject | Brownian motion | - |
dc.subject | common shock | - |
dc.subject | compound Poisson process | - |
dc.subject | diffusion process | - |
dc.subject | exponential utility | - |
dc.subject | Hamilton–Jacobi–Bellman equation | - |
dc.subject | proportional reinsurance | - |
dc.title | Optimal dynamic reinsurance with dependent risks: variance premium principle | - |
dc.type | Article | - |
dc.identifier.email | Yuen, KC: kcyuen@hku.hk | - |
dc.identifier.authority | Yuen, KC=rp00836 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1080/03461238.2014.892899 | - |
dc.identifier.scopus | eid_2-s2.0-84947042093 | - |
dc.identifier.hkuros | 231706 | - |
dc.identifier.volume | 2016 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 18 | - |
dc.identifier.epage | 36 | - |
dc.identifier.isi | WOS:000364327900002 | - |
dc.publisher.place | Sweden | - |
dc.identifier.issnl | 0346-1238 | - |