Optimal time-consistent investment and reinsurance strategies for mean–variance insurers with state dependent risk aversion
By Yongwu Li, Zhongfei Li. 2013
74 citations recorded by the source corpus.
In this paper, we study an insurer’s optimal time-consistent strategies under the mean–variance criterion with state dependent risk aversion. It is assumed that the surplus process is approximated by a diffusion process. The insurer can purchase proportional reinsurance and invest in a financial market which consists of one risk-free asset and multiple risky assets whose price processes follow geometric Brownian motions. Under these, we consider two optimization problems, an investment–reinsurance problem and an investment-only problem. In particular, when the risk aversion depends dynamically on current wealth, the model is more realistic. Using the approach developed by Bjork and Murgoci (2009), the optimal time-consistent strategies for the two problems are derived by means of corresponding extension of the Hamilton–Jacobi–Bellman equation. The optimal time-consistent strategies are dependent on current wealth, this case thus is more reasonable than the one with constant risk aversion.
Subfields: Demography, Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/9913ca234b324599782e7bc5ec301069d9fb0c3d
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Citations in the corpus
- On time-inconsistent stopping problems and mixed strategy stopping times (2018, background): “Recently a considerable literature using the extended HJB system to study time-inconsistent control problems has emerged, examples include [2, 6, 17, 26, 28].”
- Robust equilibrium reinsurance-investment strategy for a mean–variance insurer in a model with jumps (2016, background): “For more details, we refer the reader to Björk and Murgoci (2010), Zeng et al. (2013), Li and Li (2013), Björk et al. (2014) and references therein.”
- Optimal investment–reinsurance strategies with state dependent risk aversion and VaR constraints in correlated markets (2019, methodology): “Li and Li (2013) extended the work of Björk et al. (2014) to the optimal investmentreinsurance problem, in which the surplus process is approximated by a diffusion process.”