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| Natura: | Preprint |
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2024
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| Accesso online: | https://arxiv.org/abs/2405.06235 |
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| _version_ | 1866909320206090240 |
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| author | Liang, Zongxia Xia, Yi Zou, Bin |
| author_facet | Liang, Zongxia Xia, Yi Zou, Bin |
| contents | We propose a two-layer stochastic game model to study reinsurance contracting and competition in a market with one insurer and two competing reinsurers. The insurer negotiates with both reinsurers simultaneously for proportional reinsurance contracts that are priced using the variance premium principle. The reinsurance contracting between the insurer and each reinsurer is modeled as a Stackelberg game. The two reinsurers compete for business from the insurer and optimize the so-called relative performance, instead of their own surplus, and their competition is settled by a noncooperative Nash game. We obtain a sufficient and necessary condition, related to the competition degrees of the two reinsurers, for the existence of an equilibrium. We show that the equilibrium, if exists, is unique, and the equilibrium strategy of each player is constant, fully characterized in semiclosed form. Furthermore, we obtain interesting sensitivity results for the equilibrium strategies through both analytical and numerical studies. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2405_06235 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | A Two-layer Stochastic Game Approach to Reinsurance Contracting and Competition Liang, Zongxia Xia, Yi Zou, Bin Mathematical Finance We propose a two-layer stochastic game model to study reinsurance contracting and competition in a market with one insurer and two competing reinsurers. The insurer negotiates with both reinsurers simultaneously for proportional reinsurance contracts that are priced using the variance premium principle. The reinsurance contracting between the insurer and each reinsurer is modeled as a Stackelberg game. The two reinsurers compete for business from the insurer and optimize the so-called relative performance, instead of their own surplus, and their competition is settled by a noncooperative Nash game. We obtain a sufficient and necessary condition, related to the competition degrees of the two reinsurers, for the existence of an equilibrium. We show that the equilibrium, if exists, is unique, and the equilibrium strategy of each player is constant, fully characterized in semiclosed form. Furthermore, we obtain interesting sensitivity results for the equilibrium strategies through both analytical and numerical studies. |
| title | A Two-layer Stochastic Game Approach to Reinsurance Contracting and Competition |
| topic | Mathematical Finance |
| url | https://arxiv.org/abs/2405.06235 |