Classical and Impulse Control for the Optimization of Dividend and Proportional Reinsurance Policies with Regime Switching

Jiaqin Wei, Hailiang Yang*, Rongming Wang

*Corresponding author for this work

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

We consider the optimal proportional reinsurance and dividend strategy. The surplus process is modeled by the classical compound Poisson risk model with regime switching. Considering a class of utility functions, the object of the insurer is to select the reinsurance and dividend strategy that maximizes the expected total discounted utility of the shareholders until ruin. By adapting the techniques and methods of stochastic control, we study the quasi-variational inequality for this classical and impulse control problem and establish a verification theorem. We show that the optimal value function is characterized as the unique viscosity solution of the corresponding quasi-variational inequality.

Original languageEnglish
Pages (from-to)358-377
Number of pages20
JournalJournal of Optimization Theory and Applications
Volume147
Issue number2
DOIs
Publication statusPublished - 2010

Keywords

  • Dividend strategy
  • Proportional reinsurance
  • Quasi-variational inequality
  • Regime switching
  • Viscosity solution

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