Abstract
ABSTRACT This paper investigates a Stackelberg stochastic differential reinsurance–investment game problem, in which the reinsurer is the leader and the insurer is the follower. The unequal status of the reinsurer and the insurer in the financial market is characterized by the asymmetric information model. We consider their wealth processes with delay to characterize bounded memory. The objective of the reinsurer is to find the optimal premium pricing strategy and investment strategy such that its constant absolute risk aversion (CARA) utility of the combination of terminal wealth and average performance wealth is maximized. The objective of the insurer is to find the optimal reinsurance strategy and investment strategy such that its CARA utility of the relative performance is maximized. We derive the equilibrium strategy explicitly for the game by solving corresponding Hamilton–Jacobi–Bellman equations sequentially. Then, we establish the verification theorem. The equilibrium investment strategy indicates that the insurer with less information completely imitates the investment strategy of the reinsurer who has more information on the financial market. Further, we find that the effect of the delay weight on the equilibrium strategy is related to the length of delay time. Finally, we present some numerical examples to demonstrate the findings.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.