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On optimal proportional reinsurance and investment in a Partial Markovian regime-switching economy
ZHANG Xin *
School of Mathematical Sciences, Nankai University, TianJin 300071
*Correspondence author
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Funding: National Natural Science Foundation of China（No.NSFC grant No.11001139,11171164）, the Specialized Research Fund forthe Doctoral Program of Higher Education（No.SRFDP Grant No. 20100031120002）
Opened online: 3 August 2012
Accepted by: none
Citation: ZHANG Xin.On optimal proportional reinsurance and investment in a Partial Markovian regime-switching economy[OL]. [ 3 August 2012] http://en.paper.edu.cn/en_releasepaper/content/4485853
 
 
In this paper, we consider the problem of optimal reinsurance and investmentin a multiple risky assets market with appreciation rate driven by a hiddenMarkov chain. The surplus of the insurance company is modeled by a Brownianmotion with drift and the objective function is the expected exponential utility. Byusing the filtering theory, we establish the separation principle and reduce the problemto the complete observed case. Through the dynamic programming approach andthe Girsanov change of measure, we characterize the value function as the uniqueviscosity solution of a linear parabolic partial differential equation and obtain theFeynman-Kac representation of the value function.
Keywords:Applied Probability; Hidden Markov chain; exponential utility; partial information; HJB equation
 
 
 

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