Robust Optimal Portfolio and Reinsurance for an Insurer under Inflation Risk
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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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