Optimal credit investment and risk control for an insurer with regime-switching
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Publication:2633456
Abstract: This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under regime-switching risk. Default events have an impact on the distress state of the surviving stocks in the portfolio. The aim of the insurer is to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. We characterize the optimal trading strategy of defaultable stocks and risk control for the insurer. By developing a truncation technique, we analyze the existence and uniqueness of global (classical) solutions to the recursive HJB system. We prove the verification theorem based on the (classical) solutions of the recursive HJB system.
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Cited in
(6)- Portfolio selection and risk control for an insurer with uncertain time horizon and partial information in an anticipating environment
- Optimal investment and risk control strategies for an insurer subject to a stochastic economic factor in a Lévy market
- Optimal investment of an insurer with regime-switching and risk constraint
- Risk sensitive portfolio optimization with default contagion and regime-switching
- Constrained equilibrium investment and risk control strategies under a non-Markovian regime-switching model
- Optimal dividend, investment, and risk control strategies in a financial market with dynamic contagion jumps
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