Associate Professor Xiang Hu, a researcher of the base, has published a collaborative paper titled "Equilibrium mean–variance reinsurance and investment strategies for a general insurance company under smooth ambiguity" in  North American Journal of Economics and Finance

Abstract:

This work investigates the equilibrium investment and reinsurance strategies for a general insurance company under smooth ambiguity. The general insurance company holds shares of an insurance company and a reinsurance company. The claims of the insurer follow a compound Poisson process. The insurer can divide part of the insurance risk to the reinsurer. Besides, the insurer and reinsurer both participate in the financial market and invest in cash and stock. However, the general insurance company is ambiguous about the insurance and financial risks and is an ambiguity-averse manager (AAM). The uncertainties over the insurance and financial risks are described by second-order distributions. The AAM aims to maximize the average performance of the weighted sum surplus process of the insurer and reinsurer under the mean–variance criterion and smooth ambiguity. We present the extended Hamilton–Jacobi–Bellman (HJB) system for the optimization problem combining the mean–variance criterion and smooth ambiguity. In the case that the second-order distributions are Gaussian, we obtain the closed-forms of the equilibrium reinsurance and investment strategies. At the end of this work, sensitivity analyses are presented to show the economic behaviors of the AAM.

Key Words: Proportional reinsurance; Investment; Equilibrium strategy; Smooth ambiguity; Mean–variance

Link：https://www.sciencedirect.com/science/article/pii/S1062940822001310

Teacher profile

Xiang Hu, associate professor at the School of Finance, Zhongnan University of Economics and Law, and "Wenlan Young Scholar" at Zhongnan University of Economics and Law. His research interest covers actuarial accounting and risk management. ,  He has published more than 20 papers in Insurance Mathematics and Economics, ASTIN Bulletin, Scandinavian Actuarial Journal, North American Actuarial Journal, Statistical Research, Insurance Study and other academic journals. He has presided over and participated in a number of National Natural Science Foundation projects and National Social Science Foundation projects.