Continuous-time optimal reinsurance strategy with nontrivial curved structures

Hui Meng*, Pu Liao, Tak Kuen Siu

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This work uses different classes of premium principles (including the expected value premium principle, the variance premium principle and the exponential premium principle) as well as optimal reinsurance problems to minimize the probability of ruin and maximize the expected utility in both a diffusion insurance risk model and a compound Poisson insurance risk model. The optimal reinsurance strategy with a nontrivial structure and its respective optimal value function are obtained. Specifically, the optimal reinsurance strategy has a curved form, which is distinguished from the conventional proportional and excess-of-loss reinsurance strategies. Numerical analyses are provided to illustrate the behaviors of the optimal reinsurance strategies under different objective criteria and different insurance risk processes.

Original languageEnglish
Article number124585
Pages (from-to)1-21
Number of pages21
JournalApplied Mathematics and Computation
Volume363
DOIs
Publication statusPublished - 15 Dec 2019

Keywords

  • Dynamic programming
  • Expected utility
  • Optimal reinsurance strategy
  • Premium principle
  • Ruin probability

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