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| Robust Optimal Portfolio and Reinsurance for an Insurer under Inflation Risk |
| OU Hui, HUANG Ya, YANG Xiangqun, ZHOU Jieming |
| College of Mathematics and Computer Sciences, Performance Computing and Stochastic Information Processing (Ministry of Education of China), Hunan Normal University; College of Business Administration, Hunan University |
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Abstract In this paper, we investigate a robust optimal portfolio and
reinsurance problem under inflation risk for an ambiguity-averse insurer (AAI), who worries
about uncertainty in model parameters. We assume that the AAI is allowed to purchase
proportional reinsurance and invest his/her wealth in a financial market which consists of
a risk-free asset and a risky asset. The objective of the AAI is to maximize the minimal
expected power utility of terminal wealth. By using techniques of stochastic control theory,
closed-form expressions for the value function and optimal strategies are obtained.
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Corresponding Authors:
OU Hui
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