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Optimal Investment and Risk Control Strategies for an Insurance Fund in Stochastic Framework
School of Mathematical Sciences, Dalian University of Technology, Dalian, China
School of Mathematical Sciences, Dalian University of Technology, Dalian, China
School of Mathematical Sciences, Dalian University of Technology, Dalian, China
- 1 School of Mathematical Sciences, Dalian University of Technology, Dalian, China
- 2 School of Mathematical Sciences, Dalian University of Technology, Dalian, China
- 3 School of Mathematical Sciences, Dalian University of Technology, Dalian, China
Journal of Mathematical Finance·Volume 09 (2019)·Pages 254–265·Published 19 June 2019·DOI10.4236/jmf.2019.93014
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Abstract
This paper considers optimal investment and risk control problem under the Hull and White Stochastic Volatility (SV) model for an Insurer who aims to optimize the investment and risk control strategies. The surplus process of the insurer is assumed to follow the Brownian motion with drift. An Insurer can invest in the financial market consisting of risk-free and risky assets whose price process satisfies Hull-White SV model. By applying the stochastic dynamic programming approach, we derive closed-form expressions for the optimal strategies and the value function. We find that under the Hull and White model, the interest rate and risk aversion parameters both influence optimal strategies. Moreover, we provide a numerical example to illustrate the model’s economic implications.
KeywordsHull-White SV ModelInvestment PoliciesStochastic Optimal ControlRe-insurance
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