Expected utility maximization for an insurer with investment and risk control under inside information

Abstract

This paper studies optimal investment and risk control strategies for an insurer who owns insider information. The insurance risk process is governed by a general jump diffusion process with random parameters and is correlated with the risky asset process in the financial market. We model the inside information by a general random variable related to the insurance risk process and the risky asset process. Under the criterion of expected utility maximization of the terminal wealth, we adopt white noise calculus and BSDE approach to analyze the problem for various utility functions.

Keywords:

• Investment
• risk control
• inside information
• Donsker Delta function
• BSDE

2010 MATHEMATICS SUBJECT CLASSIFICATION:

• 97M30
• 91G80
• 93E20
• 60H30

Acknowledgment

The author is very grateful to the Editor and two anonymous referees for their valuable comments and suggestions, which led to an improvement of the presentation of the work.

Additional information

Funding

Supported in part by the National Natural Science Foundation of China (No. 11701436) and the Fundamental Research Funds for the Central Universities (WUT: 2018IB019).