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Dynamic reinsurance via martingale transport

Published: January 15, 2026 | arXiv ID: 2601.10375v1

By: Beatrice Acciaio , Brandon Garcia Flores , Antonio Marini and more

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.

Category
Quantitative Finance:
Risk Management