An Application Of Game Theory To Optimal Excess-Loss Reinsurance

Game theory is a theory, which uses the rigorous mathematical model to research the confrontation optimal policy decision problems of the real word. The last three or four decades, the game theory as the forefront of the field of modern economics has become a basic analysis tool occupying mainstream position. Turning to the game theory at present mainly refers to the non-cooperative game, in which all players maximize their own interests, and ultimately achieve balance of power.In this paper, we use non-cooperative game to solve the problem of optimal reinsurance. We think the original insurer and reinsurer as the players of the game. In the third chapter, we give a model of nets of reinsurance, and in the fourth chapter we study the excess-of-loss reinsurance, which influenced by investment profit. Then we in a dynamic game theory model with complete information analyze the optimal strategies of both original insurer and reinsurer as well as the equilibrium result. The optimal reinsurance premium gained under the frame of game reflects the fact that insurance agents with conflicted interests make decisions dynamically and by order.