Optimal threshold dividend strategies under the compound Poisson model with regime switching

Jiaqin Wei, Hailiang Yang, Rongming Wang

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In this paper, we consider the optimal dividend strategy for an insurer whose surplus process is modeled by the classical compound Poisson risk model modulated by an observable continuous-time Markov chain. The object of the insurer is to select the dividend strategy that maximizes the expected total discounted dividend payments until ruin. We assume that the company only allows to pay dividend at a small rate. Given some conditions, similar to the results of Sotomayor and Cadenillas (2008) and Jiang and Pistorius (2008), the optimal strategy of our model is also a modulated threshold strategy which depends on the environment state. For the case of two regimes and exponential claim sizes, we obtain an analytical solution.
Original languageEnglish
Title of host publicationStochastic analysis with financial applications
EditorsArturo Kohatsu-Higa, Nicolas Privault, Shuenn-Jyi Sheu
Place of PublicationBasel
PublisherBirkhäuser
Pages413-429
Number of pages17
ISBN (Print)9783034800969
DOIs
Publication statusPublished - 2011
Externally publishedYes

Keywords

  • regime switching
  • dividend strategy
  • compound Poisson model
  • stochastic control
  • HJB equation

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