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Article: Optimal debt ratio and dividend payment strategies with reinsurance

TitleOptimal debt ratio and dividend payment strategies with reinsurance
Authors
Issue Date2015
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime
Citation
Insurance: Mathematics and Economics, 2015, v. 64, p. 351-363 How to Cite?
AbstractThis 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. The explicit solution of the value function is derived and the corresponding optimal debt ratio and dividend payment strategies are obtained in some special cases. An example is provided to illustrate the methodologies and some interesting economic insights.
Persistent Identifierhttp://hdl.handle.net/10722/231321
ISSN
2015 Impact Factor: 1.378
2015 SCImago Journal Rankings: 1.000

 

DC FieldValueLanguage
dc.contributor.authorJin, Z-
dc.contributor.authorYang, H-
dc.contributor.authorYin, G-
dc.date.accessioned2016-09-20T05:22:18Z-
dc.date.available2016-09-20T05:22:18Z-
dc.date.issued2015-
dc.identifier.citationInsurance: Mathematics and Economics, 2015, v. 64, p. 351-363-
dc.identifier.issn0167-6687-
dc.identifier.urihttp://hdl.handle.net/10722/231321-
dc.description.abstractThis 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. The explicit solution of the value function is derived and the corresponding optimal debt ratio and dividend payment strategies are obtained in some special cases. An example is provided to illustrate the methodologies and some interesting economic insights.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime-
dc.relation.ispartofInsurance: Mathematics and Economics-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleOptimal debt ratio and dividend payment strategies with reinsurance-
dc.typeArticle-
dc.identifier.emailYang, H: hlyang@hku.hk-
dc.identifier.authorityYang, H=rp00826-
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.insmatheco.2015.07.005-
dc.identifier.hkuros263499-
dc.identifier.volume64-
dc.identifier.spage351-
dc.identifier.epage363-
dc.publisher.placeNetherlands-

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