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arXiv · 1807.06892

A unifying approach to constrained and unconstrained optimal reinsurance

Yuxia Huang·Chuancun Yin
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Abstract

In this paper, we study two classes of optimal reinsurance models from perspectives of both insurers and reinsurers by minimizing their convex combination where the risk is measured by a distortion risk measure and the premium is given by a distortion premium principle. Firstly, we show that how optimal reinsurance models for the unconstrained optimization problem and constrained optimization problems can be formulated in a unified way. Secondly, we propose a geometric approach to solve optimal reinsurance problems directly. This paper considers a class of increasing convex ceded loss functions and derives the explicit solutions of the optimal reinsurance which can be in forms of quota-share, stop-loss, change-loss, the combination of quota-share and change-loss or the combination of change-loss and change-loss with different retentions. Finally, we consider two specific cases: Value at Risk (VaR) and Tail Value at Risk (TVaR).

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Yuxia Huang, Chuancun Yin. 2018-07-18. A unifying approach to constrained and unconstrained optimal reinsurance. https://arxiv.org/abs/1807.06892

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