Publications
As the only research organization in the financial sector in several new technology areas, we are raising the status of
Hana Financial Group and achieving external achievements through world-renowned conferences.
Papers
Optimal Reinsurance and Portfolio Selection:Comparison between Partial and Complete Information...
- Date of publication
- 2021.01.18
- Issuing agency (Year)
- European Financial Management(2021)
- Author
- Hyun-Tak Lee, Kyeong Tae Kim, Bong-Gyu Jang
- Link
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2727075
Abstract
This paper studies how partial information for insurers can have unique information quality over complete information in a two-state regime-switching market environment. In our models, we consider a partially-informed insurer who learns time variation in expected returns across the two regimes and a completely-informed insurer who ascertains how often such regime switches happen on average. We find that the optimal reinsurance and investment strategies for the partially-informed insurer depend on prior belief, whereas those for the completely-informed insurer do not. We also find that information quality can affect the insurersóptimal behaviors mainly through the relative difference between the risk-adjusted market premium and the risk-adjusted insurance premium projected on the financial market.Numerical results indicate that partial information on the market parameters tend to lead insurers to more conservative strategies than complete information does.
PDF View