Optimal Reinsurance-Investment Strategy for a Monotone Mean-Variance Insurer in the Cram\'er-Lundberg Model

Abstract

As classical mean-variance preferences have the shortcoming of non-monotonicity, portfolio selection theory based on monotone mean-variance preferences is becoming an important research topic recently. In continuous-time Cram\'er-Lundberg insurance and Black-Scholes financial market model, we solve the optimal reinsurance-investment strategies of insurers under mean-variance preferences and monotone mean-variance preferences by the HJB equation and the HJBI equation, respectively. We prove the validity of verification theorems and find that the optimal strategies under the two preferences are the same. This illustrates that neither the continuity nor the completeness of the market is necessary for the consistency of two optimal strategies. We make detailed explanations for this result. Thus, we develop the existing theory of portfolio selection problems under the monotone mean-variance criterion