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This paper studies the optimal proportional reinsurance and investment strategy for an insurer who invests one paired assets, where their price spread is described by Ornstein-Uhlenbeck (O-U) processes. The insurer's objective is to maximize the expected exponential utility of the terminal wealth in a finite time horizon under two risk models: a classical risk model and a diffusion model. Using the classical stochastic control approach based on the Hamilton-Jacobi-Bellman equation, we characterize the optimal strategies and provide a verification result for the value function via the exponential integrability of the square of an O-U process. Finally, numerical examples are performed to obtain sensitivity analysis.

Optimal proportional reinsurance and pairs trading under exponential utility criterion for the insurer