Title: Mean-variance asset-liability management with affine diffusion factor process and a reinsurance option
Authors: Zhongyang Sun - Sun Yat-sen University (China) [presenting]
Abstract: An optimal asset-liability management problem for an insurer under the mean-variance criterion is considered. The value of liabilities is described by a geometric Brownian motion while the insurer's risk process is modeled by a general jump process generated by a marked point process. The financial market consists of one risk-free asset and n risky assets with the market price of risk relying on an affine diffusion factor process. By transferring a proportion of insurance risk to a reinsurer and investing the surplus into the financial market, the insurer aims to maximize the expected terminal net wealth and, at the same time, minimize the variance of the terminal net wealth. By using a backward stochastic differential equation (BSDE) approach, closed-form expressions for the efficient frontier and efficient strategy are derived.