Please use this identifier to cite or link to this item:
http://hdl.handle.net/10397/93921
Title: | Dynamic optimal reinsurance and dividend payout in finite time horizon | Authors: | Guan, C Xu, ZQ Zhou, R |
Issue Date: | Feb-2023 | Source: | Mathematics of operations research, Feb. 2023, v. 48, no. 1, p. 544-568 | Abstract: | This paper studies a dynamic optimal reinsurance and dividend-payout problemfor an insurance company in a finite time horizon. The goal of the company is to maximize the expected cumulative discounted dividend payouts until bankruptcy or maturity, whichever comes earlier. The company is allowed to buy reinsurance contracts dynamically over the whole time horizon to cede its risk exposure with other reinsurance companies. This is a mixed singular–classical stochastic control problem, and the corresponding Hamilton–Jacobi–Bellman equation is a variational inequality with a fully nonlinear operator and subject to a gradient constraint.We obtain the C2,1 smoothness of the value function and a comparison principle for its gradient function by the penalty approximationmethod so that one can establish an efficient numerical scheme to compute the value function. We find that the surplus-time space can be divided into three nonoverlapping regions by a risk-magnitude and time-dependent reinsurance barrier and a time-dependent dividend-payout barrier. The insurance company should be exposed to a higher risk as its surplus increases, be exposed to the entire risk once its surplus upward crosses the reinsurance barrier, and pay out all its reserves exceeding the dividendpayout barrier. The estimated localities of these regions are also provided. | Keywords: | Optimal reinsurance Pptimal dividend payout Free boundary problem Dynamic programming Stochastic optimal control Mixed singular–classical stochastic control |
Publisher: | Institute for Operations Research and the Management Sciences | Journal: | Mathematics of operations research | ISSN: | 0364-765X | EISSN: | 1526-5471 | DOI: | 10.1287/moor.2022.1276 | Rights: | © 2022 INFORMS This is the accepted manuscript of the following article: Chonghu Guan, Zuo Quan Xu, Rui Zhou (2022) Dynamic Optimal Reinsurance and Dividend Payout in Finite Time Horizon. Mathematics of Operations Research 48(1):544-568, which has been published in final form at https://doi.org/10.1287/moor.2022.1276. |
Appears in Collections: | Journal/Magazine Article |
Files in This Item:
File | Description | Size | Format | |
---|---|---|---|---|
Xu_Dynamic_Optimal_Reinsurance.pdf | Pre-Published version | 1.66 MB | Adobe PDF | View/Open |
Page views
46
Last Week
1
1
Last month
Citations as of Apr 28, 2024
Downloads
54
Citations as of Apr 28, 2024
SCOPUSTM
Citations
2
Citations as of Apr 19, 2024
WEB OF SCIENCETM
Citations
3
Citations as of May 2, 2024
Google ScholarTM
Check
Altmetric
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.