In this paper, we describe a large insurance company's surplus by a Brownian motion with positive drift, which is the approximation of a classical risk process. The problem of minimizing the probability of ruin by controlling the combinational quota-share and excess-of-loss reinsurance strategy is considered. We show that the optimal combinational reinsurance strategy must be the pure excess-of-loss reinsurance strategy. Moreover, we give an explicit solution for the optimal reinsurance strategy.
|Number of pages||9|
|Journal||Applied Stochastic Models in Business and Industry|
|Publication status||Published - Jan 2007|
- Combinational reinsurance strategy
- Hamilton-Jacobi-Bellman equation
- Minimal probability of ruin