Journal article

Optimal debt ratio and dividend payment strategies with reinsurance

Zhuo Jin, Hailiang Yang, G Yin

INSURANCE MATHEMATICS & ECONOMICS | ELSEVIER SCIENCE BV | Published : 2015

Abstract

This paper derives the optimal debt ratio and dividend payment strategies for an insurance company. Taking into account the impact of reinsurance policies and claims from the credit derivatives, the surplus process is stochastic that is jointly determined by the reinsurance strategies, debt levels, and unanticipated shocks. The objective is to maximize the total expected discounted utility of dividend payment until financial ruin. Using dynamic programming principle, the value function is the solution of a second-order nonlinear Hamilton-Jacobi-Bellman equation. The subsolution-supersolution method is used to verify the existence of classical solutions of the Hamilton-Jacobi-Bellman equation..

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University of Melbourne Researchers

Grants

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


Awarded by National Science Foundation


Funding Acknowledgements

We are grateful to the anonymous referee for his/her valuable comments and suggestions. This research was supported in part by Faculty Research Grant by The University of Melbourne. The research of H. Yang was supported in part by Research Grants Council of the Hong Kong Special Administrative Region (project No. HKU 705313P) and Society of Actuaries' Centers of Actuarial Excellence Research Grant. The research of G. Yin was supported in part by the National Science Foundation under DMS-1207667.