Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/18283
Title: Optimal stochastic differential games with var constraints
Authors: Liu, J
Yiu, KFC 
Keywords: Dynamic programming
HJBI equations
Nash equilibria
Optimal investment
Proportional reinsurance
Risk constraint
Stochastic differential game
Issue Date: 2013
Publisher: Amer Inst Mathematical Sciences
Source: Discrete and continuous dynamical systems - series b, 2013, v. 18, no. 7, p. 1889-1907 How to cite?
Journal: Discrete and Continuous Dynamical Systems - Series B 
Abstract: The nonlinear dynamic games between competing insurance companies are interesting and important problems because of the general practice of using re-insurance to reduce risks in the insurance industry. This problem becomes more complicated if a proper risk control is imposed on all the involving companies. In order to understand the dynamical properties, we consider the stochastic differential game between two insurance companies with risk constraints. The companies are allowed to purchase proportional reinsurance and invest their money into both risk free asset and risky (stock) asset. The competition between the two companies is formulated as a two player (zero-sum) stochastic differential game. One company chooses the optimal reinsurance and investment strategy in order to maximize the expected payoff, and the other one tries to minimize this value. For the purpose of risk management, the risk arising from the whole portfolio is constrained to some level. By the principle of dynamic programming, the problem is reduced to solving the Hamilton-Jacobi-Bellman-Isaacs (HJBI) equations for Nash equilibria. We derive the Nash equilibria explicitly and obtain closed form solutions to HJBI under different scenarios.
URI: http://hdl.handle.net/10397/18283
ISSN: 1531-3492
DOI: 10.3934/dcdsb.2013.18.1889
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