Studies from Yangtze University Yield New Information about Investment (Robust Optimal Reinsurance and Investment With Inflation Risk: a Game-theoretic Approach and Explicit Solutions): Investment

2026 JUL 20 (NewsRx) -- By a News Reporter-Staff News Editor at Disease Prevention Daily -- Current study results on Investment have been published. According to news reporting from Hubei, People’s Republic of China, by NewsRx journalists, research stated, “This paper investigates robust optimal reinsurance and investment for an insurer facing both inflation risk and model ambiguity. The surplus is described by a diffusion approximation of the Cramer-Lundberg model, and purchasing-power risk is incorporated through a mean-reverting inflation factor.”

Financial support for this research came from Jingzhou Municipal Science and Technology Bureau.

The news correspondents obtained a quote from the research from Yangtze University, “Specifically, the log-inflation index is modeled by an Ornstein-Uhlenbeck process, which yields a two-dimensional real-wealth system and captures state-dependent inflation effects absent under geometric Brownian inflation. Model ambiguity is represented by an adversarial probability distortion with an entropy penalty, allowing the adversary to distort the insurance, financial, and inflation channels in a unified framework. The decision problem is formulated as a zero-sum stochastic differential game. We establish a rigorous duality between the entropy-penalized robust formulation and a risk-sensitive control problem, and derive the associated Hamilton-Jacobi-Bellman-Isaacs (HJBI) equation. Our main theoretical contribution is a tractable characterization of the robust optimal strategies in a finite-horizon setting with non-zero interest rates. By an exponential-quadratic transformation, the nonlinear HJBI equation is reduced to a system of ordinary differential equations of Riccati type, which yields feedback-form optimal reinsurance and investment rules featuring an explicit inflation-hedging component and a novel mean-reversion hedging demand. We further show that the solution collapses to the geometric-Brownian-inflation benchmark as the mean-reversion speed tends to zero.”

According to the news reporters, the research concluded: “Numerical experiments illustrate that ambiguity aversion amplifies effective risk aversion, strengthens reinsurance demand, and induces a pronounced flight-to-safety effect, with substantially different hedging behavior under mean-reverting versus non-mean-reverting inflation.”

For more information on this research see: Robust Optimal Reinsurance and Investment With Inflation Risk: a Game-theoretic Approach and Explicit Solutions. AIMS Mathematics, 2026;11(3):7330-7352. AIMS Mathematics can be contacted at: Amer Inst Mathematical Sciences-aims, PO Box 2604, Springfield, Mo 65801-2604, United States.

Our news journalists report that additional information may be obtained by contacting XuJiang Tang, Yangtze University, College of Arts and Sciences, Dept Math & Med Care, Jingzhou 434020, Hubei, People’s Republic of China.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.3934/math.2026302. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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