Work

The Optimal Robust Investment Problem in the Foreign Stock Market of an Ambiguity-Averse Insurer

Year: 2025

Type: article

Abstract: To address the need for robust investment strategies in an increasingly uncertain global market, this study focuses on an ambiguity-averse insurer facing exchange rate uncertainty while investing in a foreign stock market. The insurer’s surplus is modeled via a classical compound Poisson process, and exchange rate dynamics are captured using an Ornstein–Uhlenbeck process for the drift component. Within the framework of maximizing expected exponential utility of terminal wealth, we derive and solve the Hamilton–Jacobi–Bellman equation to characterize the optimal investment strategy and the associated value function. Finally, a numerical example illustrates how varying model parameters influences the insurer’s optimal investment behavior.

Source: Axioms

DOI: 10.3390/axioms15010030

Authors: Linlin Tian, Yixuan Tian, Xiaoyi Zhang

Institutions: Donghua University, Hebei University of Technology

Language: English

Topic: Probability and Risk Models

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,896

Funders: National Natural Science Foundation of China, Fundamental Research Funds for the Central Universities