2024/08/12 by Arandjelović, Aleksandar, Eisenberg, Julia
#68T07 #91G05 #91G60 #Computational Finance (q-fin.CP) #FOS: Economics and business #FOS: Mathematics #Numerical Analysis (math.NA) #Optimization and Control (math.OC) #Probability (math.PR) #Risk Management (q-fin.RM)
paper · doi:10.48550/arxiv.2408.06168
We consider an insurance company which faces financial risk in the form of insurance claims and market-dependent surplus fluctuations. The company aims to simultaneously control its terminal wealth (e.g. at the end of an accounting period) and the ruin probability in a finite time interval by purchasing reinsurance. The target functional is given by the expected utility of terminal wealth perturbed by a modified Gerber-Shiu penalty function. We solve the problem of finding the optimal reinsurance strategy and the corresponding maximal target functional via neural networks. The procedure is illustrated by a numerical example, where the surplus process is given by a Cramér-Lundberg model perturbed by a mean-reverting Ornstein-Uhlenbeck process.