Optimal Reinsurance-Investment Strategy Under Risks of Interest Rate, Exchange Rate and Inflation

Guo, Chang, Zhuo, Xiaoyang, Constantinescu, Corina ORCID: 0000-0002-5219-3022 and Pamen, Olivier Menoukeu (2018) Optimal Reinsurance-Investment Strategy Under Risks of Interest Rate, Exchange Rate and Inflation. METHODOLOGY AND COMPUTING IN APPLIED PROBABILITY, 20 (4). pp. 1477-1502.

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Official URL: http://dx.doi.org/10.1007/s11009-018-9630-7

Abstract

In this paper, we pursue the optimal reinsurance-investment strategy of an insurer who can invest in both domestic and foreign markets. We assume that both the domestic and the foreign nominal interest rates are described by extended Cox-Ingersoll-Ross (CIR) models. In order to hedge the risk associated to investments, rolling bonds, treasury inflation protected securities and futures are purchased by the insurer. We use the dynamic programming principles to explicitly derive both the value function and the optimal reinsurance-investment strategy. As a conclusion, we analyze the impact of the model parameters on both the optimal strategy and the optimal utility.

Item Type:	Article
Uncontrolled Keywords:	Optimal reinsurance-investment strategy, Foreign exchange market, Extended CIR, Stochastic inflation, Dynamic programming principle, 49L20, 91G80
Depositing User:	Symplectic Admin
Date Deposited:	03 Apr 2018 15:34
Last Modified:	19 Jan 2023 06:36
DOI:	10.1007/s11009-018-9630-7
Open Access URL:	https://link.springer.com/article/10.1007/s11009-0...
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3019752