Optimal proportional reinsurance with constant dividend barrier

Yuan, Haili; Hu, Yijun

doi:10.1016/s0252-9602(10)60078-1

Cited by 2 publications

(3 citation statements)

References 8 publications

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“…Others have concentrated on the way in which certain balance sheet items of insurers have been influenced by reporting or fiscal objectives (Gaver and Paterson, 2010) or by underestimation of technical provisions on the balance sheet (Petroni, 1992) or verifying the adequacy of reserves (liability adequacy test) (Giovando, 2006). Various observers have examined the relationship between a series of stochastic models used by insurers and the dividend distributed by these to their shareholders (Haili and Yijun, 2010;Lin et al, 2003;Taksar, 2000).…”

Section: Literaturementioning

confidence: 99%

How has Italian insurers' asset book value evolved from 1998 to 2012?

Giovando

Venuti

2016

JIBED

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This research aims to analyse the dynamics of the book value of assets of a cross-section of Italian insurers in a medium/long period of time (from 1998 to 2012), correlating this with Italian nominal GDP. Subsequently, to permit more in-depth investigation of these dynamics, the research, based on a quantitative method, moves from an analysis of the absolute values to analysis of the rates of change of the assets book value with those of the Italian GDP. Lastly, for more analysis, attention has been focused on certain assets considered particularly significant. In this way, this research correlates macroeconomic variables with some of the most important financial variables (assets) in a medium/long period of time, that cover years both before and after the global crisis that started in 2007. This study may offer interesting suggestions both at theoretical and practical levels, mainly for managers (who frequently base their decisions only upon short-time data) and potential long-time investors.

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Section: Literaturementioning

confidence: 99%

How has Italian insurers' asset book value evolved from 1998 to 2012?

Giovando

Venuti

2016

JIBED

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“…Following the framework of Bai and Guo , Cao and Wan , Egami and Young , Eisenberg and Schmidli , Haili and Yijun , He and Liang , Hojgaard and Taksar , Luo et al , Markussen and Taksar , Promislow and Young , Schmidli , and Zeng , the claims process is hereafter assumed to be modeled by a Brownian motion with drift. As a result, the cumulative claims process C ( t ) may be modeled by a Brownian motion with drift of a similar type, that is,

normald C (t) MathClass-rel= a normald t MathClass-bin- b normald B (t) MathClass-punc,

where a and b are positive constants.…”

Section: The Modelmentioning

confidence: 99%

“…As we are considering in this paper the problem of optimal investment of the reserves of the firm and of reinsurance of the total risk portfolio of the firm, this is an assumption that we may adopt without getting into any serious conceptual or modeling pitfalls. This assumption is commonly adopted in the literature (see, e.g., Bai and Guo , Cao and Wan , Egami and Young , Eisenberg and Schmidli , Haili and Yijun , He and Liang , Hojgaard and Taksar , Luo et al , Markussen and Taksar , Promislow and Young , Schmidli , Zeng , in which the Brownian motion with drift is used as a model for the claims process). Although this model is not an exact model for the claims process, its simplicity allows for closed‐form results that qualitatively capture the essence of the phenomena and rewards us for possible deviations in terms of quantitative results.…”

Section: Introductionmentioning

confidence: 99%

Optimal investment and reinsurance policies in insurance markets under the effect of inside information

Baltas

Frangos

Yannacopoulos

2011

Appl Stoch Models Bus & Ind

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In this paper, we study the problem of optimal investment and proportional reinsurance coverage in the presence of inside information. To be more precise, we consider two firms: an insurer and a reinsurer who are both allowed to invest their surplus in a Black-Scholes-type financial market. The insurer faces a claims process that is modeled by a Brownian motion with drift and has the possibility to reduce the risk involved with this process by purchasing proportional reinsurance coverage. Moreover, the insurer has some extra information at her disposal concerning the future realizations of her claims process, available from the beginning of the trading interval and hidden from the reinsurer, thus introducing in this way inside information aspects to our model. The optimal investment and proportional reinsurance decision for both firms is determined by the solution of suitable expected utility maximization problems, taking into account explicitly their different information sets. The solution of these problems also determines the reinsurance premia via a partial equilibrium approach. Promislow and Young [3], Schmidli [4][5][6], Liang [7], Xu, Wang et al. [8], and references therein. The majority of these works, to the best of our knowledge, deal with the problems of maximization of the expected terminal wealth, or the minimization of the ruin probability of an insurance firm, by choosing the proper investment and/or reinsurance strategies. Also, certain papers have looked at the problem from the point of view of the reinsurer as well, see, for example, Borch [9]. These papers lead to interesting theoretical and mathematical results that may also act as benchmarks for practitioners when trying to decide for choosing the right investment and/or reinsurance policy.However, in the relative literature so far, the assumption that both investors (insurer and reinsurer) operate under the same information set is made. This may be realistic in terms of the information concerning the Black-Scholes financial market, in which both firms may invest, but it is not such an obvious assumption concerning the claims process they are willing to share by entering a reinsurance contract. This paper makes a first attempt in relaxing this assumption by letting one of the firms (the insurer) have some inside information, which is not available at the reinsurer's disposal, concerning her claims process. Then, both firms choose their investment and reinsurance policies in such a way so that the corresponding expected utility function of their terminal wealth is maximized, taking explicitly into account the effect of asymmetric information. The two optimization problems are connected via a partial equilibrium assumption, that is that the insurance market should clear. This natural assumption allows us to determine the equilibrium reinsurance premia, as well as the optimal investment-reinsurance policies of the two firms.The problem of inside information has been treated in the past using the enlargement of filtrations technique that has been...

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Optimal proportional reinsurance with constant dividend barrier

Cited by 2 publications

References 8 publications

How has Italian insurers' asset book value evolved from 1998 to 2012?

How has Italian insurers' asset book value evolved from 1998 to 2012?

Optimal investment and reinsurance policies in insurance markets under the effect of inside information

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