Robust optimal proportional reinsurance and investment problem for an insurer with delay and dependent risks

Abstract

In this article, we consider a robust optimal proportional reinsurance and investment problem in a model with delay and dependent risks, in which the insurer’s surplus process is assumed to follow a risk model with two dependent classes of insurance business. The insurer is allowed to purchase proportional reinsurance and invest his surplus in a financial market, which contains one risk-free asset and one risky asset whose price process satisfies a jump-diffusion model. Under the consideration of the performance-related capital inflow or outflow, the insurer’s wealth process is modeled by a stochastic differential delay equation. The insurer’s aim is to develop the robust optimal reinsurance and investment strategy for the insurer by maximizing the expected exponential utility of the combination of the average historical performance and terminal wealth under the worst-case scenario of the alternative measures. By adopting the stochastic dynamic programming technique, the expressions of the robust optimal strategy and value function are explicitly obtained. Finally, we present some numerical examples to illustrate the effects of some model parameters on the optimal strategy.