Researchers from Shandong University of Finance and Economics Describe Research in Economics (A Stackelberg reinsurance-investment game with derivatives trading): Economics

2023 MAY 09 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Investigators publish new report on agriculture. According to news reporting originating from Shandong University of Finance and Economics by NewsRx correspondents, research stated, “This paper studies a stochastic Stackelberg differential reinsurance-investment game with derivatives trading under a stochastic volatility model.”

Funders for this research include Natural Science Foundation of Shandong Province; National Natural Science Foundation of China.

Our news journalists obtained a quote from the research from Shandong University of Finance and Economics: “The reinsurer who occupies a monopoly position can price a reinsurance premium and invest her wealth in the financial market consisting of a riskless asset and a stock and derivatives tied to the stock. The insurer, the follower of the Stackelberg game, purchases proportional reinsurance from the reinsurer and invests in the same financial market. The main target of the reinsurer and the insurer is to seek their own optimal strategy to maximize the CARA utility of the relative performance. An explicit equilibrium strategy with derivatives trading is deduced by solving Hamilton-Jacobi-Bellman (HJB) equations sequentially. The equilibrium investment strategy demonstrates that the insurer and the reinsurer imitate each other’s investment strategies, showing a herd effect. In numerical experiments, the sensitivity of the equilibrium strategy to model parameters is analyzed.”

According to the news reporters, the research concluded: “For the optimal investment strategy, we find that a short position in the derivative may switch to a long position with parameters changing, which provides investors with important decision-making information.”

For more information on this research see: A Stackelberg reinsurance-investment game with derivatives trading. Boundary Value Problems, 2023,2023(1):1-24. (Boundary Value Problems - http://www.boundaryvalueproblems.com/). The publisher for Boundary Value Problems is SpringerOpen.

A free version of this journal article is available at https://doi.org/10.1186/s13661-023-01731-4.

Our news editors report that additional information may be obtained by contacting Rui Gao, School of Statistics and Mathematics, Shandong University of Finance and Economics. Additional authors for this research include Yanfei Bai.

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