Robust non-zero-sum investment and reinsurance game with default risk

This paper investigates a non-zero-sum stochastic differential game between two competitive CARA insurers, who are concerned about the potential model ambiguity and aim to seek the robust optimal reinsurance and investment strategies. The ambiguity-averse insurers are allowed to purchase reinsurance...

Full description

Saved in:
Bibliographic Details
Published in:Insurance, mathematics & economics mathematics & economics, 2019-01, Vol.84, p.115-132
Main Authors: Wang, Ning, Zhang, Nan, Jin, Zhuo, Qian, Linyi
Format: Article
Language:English
Subjects:
Ambiguity
Assets
Corporate bonds
Default risk
Dynamic programming
Equilibrium
Expected utility
Financial market
Investment
Investment policy
Investment strategy
Investments
Mathematical models
Model ambiguity
Nash equilibrium
Non-zero-sum stochastic differential game
Reinsurance
Relative performance
Robustness (mathematics)
Stochastic models
Verification
Zero sum games
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper investigates a non-zero-sum stochastic differential game between two competitive CARA insurers, who are concerned about the potential model ambiguity and aim to seek the robust optimal reinsurance and investment strategies. The ambiguity-averse insurers are allowed to purchase reinsurance treaty to mitigate individual claim risks; and can invest in a financial market consisting of one risk-free asset, one risky asset and one defaultable corporate bond. The objective of each insurer is to maximize the expected exponential utility of his terminal surplus relative to that of his competitor under the worst-case scenario of the alternative measures. Applying the techniques of stochastic dynamic programming, we derive the robust Nash equilibrium reinsurance and investment policies explicitly and present the corresponding verification theorem. Finally, we perform some numerical examples to illustrate the influence of model parameters on the equilibrium reinsurance and investment strategies and draw some economic interpretations from these results.
ISSN:0167-6687
1873-5959
DOI:10.1016/j.insmatheco.2018.09.009