­
­
­
­

Inventi Impact - Microfinance & Banking

Articles

  • Inventi:mmb/18438/15
    THE PORTFOLIOS OF AN INSURER AND A REINSURER UNDER EXPONENTIAL UTILITY FUNCTION, CONSTANT RATE OF RETURNS AND PROPORTIONAL REINSURANCE
    Silas A Ihedioha*

    This work assumed that an insurer’s and a reinsurer’s surplus processes were approximated by brownian motion with drift and the insurer could purchase proportional reinsurance from the reinsurer and tackled their optimal portfolio selection problem. It was further assumed that the risk reserves of the insurer and the reinsurer followed brownian motion with drift. Both the insurer and the reinsurer were allowed to invest in one risky and one risk-free, assets. We obtained by solving the corresponding Hamilton-Jacobi-Bellman (HJB) equations, the optimized values of the insurer and the reinsurer wealth, their optimal investments in the risky asset and the probability of survival of both of them. The conditions that would warrant reinsurance, according to the optimal reinsurance proportion chosen by the insurer were calculated.

    How to Cite this Article
    Silas A Ihedioha. The Portfolios of an Insurer and a Reinsurer under Exponential Utility Function, Constant Rate of Returns and Proportional Reinsurance. Inventi Impact: Microfinance & Banking, 2016(2):65-76, 2016.
    Download Full Text