Dynamic reinsurance via martingale transport
Risk Management
2026-01-16 v1 Optimization and Control
Probability
Abstract
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.
Cite
@article{arxiv.2601.10375,
title = {Dynamic reinsurance via martingale transport},
author = {Beatrice Acciaio and Brandon Garcia Flores and Antonio Marini and Gudmund Pammer},
journal= {arXiv preprint arXiv:2601.10375},
year = {2026}
}
Comments
16 pages, 12 figures