Journal article

Optimal dividend policy with liability constraint under a hidden Markov regime-switching model

Jiaqin Wei, Zhuo Jin, Hailiang Yang

Journal of Industrial & Management Optimization | American Institute of Mathematical Sciences | Published : 2019

Abstract

This paper deals with the optimal liability and dividend strategies for an insurance company in Markov regime-switching models. The objective is to maximize the total expected discounted utility of dividend payment in the infinite time horizon in the logarithm and power utility cases, respectively. The switching process, which is interpreted by a hidden Markov chain, is not completely observable. By using the technique of the Wonham filter, the partially observed system is converted to a completely observed one and the necessary information is recovered. The upper-lower solution method is used to show the existence of classical solution of the associated second-order nonlinear Hamilton-Jacob..

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University of Melbourne Researchers

Grants

Awarded by National Natural Science Foundation of China


Awarded by Program of Shanghai Subject Chief Scientist


Awarded by 111 Project


Awarded by Research Grants Council of the Hong Kong Special Administrative Region


Funding Acknowledgements

The first author is supported by National Natural Science Foundation of China under Grant (Nos. 11771466, 11601157, 11231005, 11571113), Program of Shanghai Subject Chief Scientist (14XD1401600), the 111 Project (B14019). The second and third author were supported in part by Research Grants Council of the Hong Kong Special Administrative Region (project No. HKU 17330816).