Reinsurance–investment game between two mean–variance insurers under model uncertainty

This paper investigates a class of robust non-zero-sum reinsurance–investment stochastic differential games between two competing insurers under the time-consistent mean–variance criterion. We allow each insurer to purchase a proportional reinsurance treaty and invest his surplus into a financial ma...

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Bibliographic Details
Published in:	Journal of computational and applied mathematics 2021-01, Vol.382, p.113095, Article 113095
Main Authors:	Wang, Ning, Zhang, Nan, Jin, Zhuo, Qian, Linyi
Format:	Article
Language:	eng
Subjects:	Mean–variance criterion Model ambiguity Nash equilibrium strategy Non-zero-sum stochastic differential game Relative performance
Online Access:	Get full text
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Summary:	This paper investigates a class of robust non-zero-sum reinsurance–investment stochastic differential games between two competing insurers under the time-consistent mean–variance criterion. We allow each insurer to purchase a proportional reinsurance treaty and invest his surplus into a financial market consisting of one risk-free asset and one risky asset to manage his insurance risk. The surplus processes of both insurers are governed by the classical Cramér–Lundberg model and each insurer is an ambiguity-averse insurer (AAI) who concerns about model uncertainty. The objective of each insurer is to maximize the expected terminal surplus relative to that of his competitor and minimize the variance of this relative terminal surplus under the worst-case scenario of alternative measures. Applying techniques in stochastic control theory, we obtain the extended Hamilton–Jacobi–Bellman (HJB) equations for both insurers. We establish the robust equilibrium reinsurance–investment strategies and the corresponding equilibrium value functions of both insurers by solving the extended HJB equations under both the compound Poisson risk model and its diffusion-approximated model. Finally, we conduct some numerical examples to illustrate the effects of several model parameters on the Nash equilibrium strategies.
ISSN:	0377-0427 1879-1778