Optimal Self-Protection via BSDEs for Risk Models with Jump Clusters
Year: 2025
Type: article
Abstract: . We investigate the optimal self-protection problem, from the point of view of an insurance buyer, when the loss process is described by a Cox-shot-noise process and a Hawkes process with an exponential memory kernel. The insurance buyer chooses both the percentage of insured losses and the prevention effort. The latter term refers to actions aimed at reducing the frequency of the claim arrivals, allowing for a different impact on the self-exciting and on the externally excited components of the claim arrival intensity. The problem consists in maximizing the expected exponential utility of terminal wealth in the presence of a terminal reimbursement. We show that this problem can be formulated in terms of a suitable backward stochastic differential equation (BSDE), for which we prove existence and uniqueness of the solution. We extend in several directions the results obtained by Bensalem, Hernandez-Santibanez, and Kazi-Tani [ Finance Stoch., 27 (2023), pp. 503–537] and compare our results with those presented therein.
DOI: 10.1137/24m1699413
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4416197348