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Article: Optimal mean-variance investment/reinsurance with common shock in a regime-switching market

TitleOptimal mean-variance investment/reinsurance with common shock in a regime-switching market
Authors
KeywordsCommon shock
Efficient frontier
Mean–variance criterion
Optimal investment-reinsurance strategy
Regime-switching
Issue Date2019
PublisherPhysica-Verlag GmbH und Co. The Journal's web site is located at http://www.springer.com/mathematics/journal/186
Citation
Mathematical Methods of Operations Research, 2019, Epub How to Cite?
AbstractIn this paper, we consider the problem of optimal investment-reinsurance with two dependent classes of insurance risks in a regime-switching financial market. In our model, the two claim-number processes are correlated through a common shock component, and the market mode is classified into a finite number of regimes. We also assume that the insurer can purchase proportional reinsurance and invest its surplus in a financial market, and that the values of the model parameters depend on the market mode. Using the techniques of stochastic linear-quadratic control, under the mean–variance criterion, we obtain analytic expressions for the optimal investment and reinsurance strategies, and derive closed-form expressions for the efficient strategies and the efficient frontiers which are based on the solutions to some systems of linear ordinary differential equations. Finally, we carry out a numerical study for illustration purpose.
Persistent Identifierhttp://hdl.handle.net/10722/271288
ISSN
2017 Impact Factor: 0.843
2015 SCImago Journal Rankings: 0.407

 

DC FieldValueLanguage
dc.contributor.authorBi, J-
dc.contributor.authorLiang, Z-
dc.contributor.authorYuen, KC-
dc.date.accessioned2019-06-24T01:07:00Z-
dc.date.available2019-06-24T01:07:00Z-
dc.date.issued2019-
dc.identifier.citationMathematical Methods of Operations Research, 2019, Epub-
dc.identifier.issn1432-2994-
dc.identifier.urihttp://hdl.handle.net/10722/271288-
dc.description.abstractIn this paper, we consider the problem of optimal investment-reinsurance with two dependent classes of insurance risks in a regime-switching financial market. In our model, the two claim-number processes are correlated through a common shock component, and the market mode is classified into a finite number of regimes. We also assume that the insurer can purchase proportional reinsurance and invest its surplus in a financial market, and that the values of the model parameters depend on the market mode. Using the techniques of stochastic linear-quadratic control, under the mean–variance criterion, we obtain analytic expressions for the optimal investment and reinsurance strategies, and derive closed-form expressions for the efficient strategies and the efficient frontiers which are based on the solutions to some systems of linear ordinary differential equations. Finally, we carry out a numerical study for illustration purpose.-
dc.languageeng-
dc.publisherPhysica-Verlag GmbH und Co. The Journal's web site is located at http://www.springer.com/mathematics/journal/186-
dc.relation.ispartofMathematical Methods of Operations Research-
dc.subjectCommon shock-
dc.subjectEfficient frontier-
dc.subjectMean–variance criterion-
dc.subjectOptimal investment-reinsurance strategy-
dc.subjectRegime-switching-
dc.titleOptimal mean-variance investment/reinsurance with common shock in a regime-switching market-
dc.typeArticle-
dc.identifier.emailYuen, KC: kcyuen@hku.hk-
dc.identifier.authorityYuen, KC=rp00836-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s00186-018-00657-3-
dc.identifier.scopuseid_2-s2.0-85060149959-
dc.identifier.hkuros298139-
dc.publisher.placeGermany-

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