2021/05/16 by Claudia Ceci, Ceci, Claudia, Katia Colaneri +3 · 2 citations
Decision Sciences · Economics, Econometrics and Finance · Social Sciences · #FOS: Economics and business #Insurance and Financial Risk Management #Insurance, Mortality, Demography, Risk Management #Mathematical Finance (q-fin.MF) #Portfolio Management (q-fin.PM) #Risk and Portfolio Optimization
paper · pdf · doi:10.48550/arxiv.2105.07524
openalex publication_date 2021/05/16 · openalex created_date 2022/07/25 · openalex updated_date 2026/07/28
We study optimal proportional reinsurance and investment strategies for an\ninsurance company which experiences both ordinary and catastrophic claims and\nwishes to maximize the expected exponential utility of its terminal wealth. We\npropose a model where the insurance framework is affected by environmental\nfactors, and aggregate claims and stock prices are subject to common shocks,\ni.e. drastic events such as earthquakes, extreme weather conditions, or even\npandemics, that have an immediate impact on the financial market and\nsimultaneously induce insurance claims. Using the classical stochastic control\napproach based on the Hamilton-Jacobi-Bellman equation, we provide a\nverification result for the value function via classical solutions to two\nbackward partial differential equations and characterize the optimal\nreinsurance and investment strategies. Finally, we make a comparison analysis\nto discuss the effect of common shock dependence.\n