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2026-01-15 13:27 UTC · q-fin.RM · q-fin.RM, math.OC, math.PR

Dynamic reinsurance via martingale transport

Beatrice Acciaio, Brandon Garcia Flores, Antonio Marini, Gudmund Pammer

We formulate a dynamic reinsurance problem in which the insurer seeks to control the terminal distribution of its surplus while minimizing the L2-norm of the ceded risk. Using techniques from martingale optimal transport, we show that, under suitable assumptions, the problem admits a tractable solution analogous to the Bass martingale. We first consider the case where the insurer wants to match a given terminal distribution of the surplus process, and then relax this condition by only requiring certain moment or risk-based constraints.
arXiv abstractPDF

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