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Bayesian optimal investment and reinsurance with dependent financial and insurance risks

Bäuerle, Nicole ORCID iD icon 1; Leimcke, Gregor 1
1 Institut für Stochastik (STOCH), Karlsruher Institut für Technologie (KIT)


Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be determined it is important to consider models which reflect this dependence. In this paper we make a proposal how to generate dependence between the financial market and claim sizes in times of crisis and determine via a stochastic control approach an optimal investment and reinsurance strategy which maximizes the expected exponential utility of terminal wealth. Moreover, we also allow that the claim size distribution may be learned in the model. We give comparisons and bounds on the optimal strategy using simple models. What turns out to be very surprising is that numerical results indicate that even a minimal dependence which is created in this model has a huge impact on the control in the sense that the insurer is much more prudent then.

Volltext §
DOI: 10.5445/IR/1000146560
Veröffentlicht am 18.05.2022
DOI: 10.48550/arXiv.2103.05777
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Stochastik (STOCH)
Publikationstyp Forschungsbericht/Preprint
Publikationsdatum 18.02.2021
Sprache Englisch
Identifikator KITopen-ID: 1000146560
Nachgewiesen in arXiv
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