OPTIMAL REINSURANCE AND INVESTMENT STRATEGY WITH TWO PIECE UTILITY FUNCTION

Lv Chen, Hailiang Yang

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

This paper studies optimal reinsurance and investment strategies
that maximize expected utility of the terminal wealth for an insurer in a stochastic market. The insurer’s preference is represented by a two-piece utility
function which can be regarded as a generalization of traditional concave utility
functions. We employ martingale approach and convex optimization method
to transform the dynamic maximization problem into an equivalent static optimization problem. By solving the optimization problem, we derive explicit
expressions of the optimal reinsurance and investment strategy and the optimal
wealth process.
Original languageEnglish
Pages (from-to)737-755
JournalJournal of Industrial and Management Optimization
Volume13
Issue number2
DOIs
Publication statusPublished - 2017
Externally publishedYes

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