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A diffusion model for optimal dividend payment and risk control for a firm under consideration of the time value of ruin

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Wuhan University Journal of Natural Sciences

Abstract

In this paper, we investigate a model for an insurance company with constraint on risk control. The objective of the insurer is to find a business policy and a dividend payment scheme so as to maximize the expected discounted value of dividend payment, and the expected present value of an amount which the insurer earns until the time of ruin. By solving the constrained Hamilton-Jacobi-Bellman equation, we obtain the explicit expression for value function and the corresponding optimal strategies.

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Correspondence to Wei Liu.

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Foundation item: Supported by the National Natural Science Foundation of China (10671149)

Biography: LIU Wei, female, Lecturer, research direction: insurance mathematics, finance mathematics.

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Liu, W., Hu, Y. A diffusion model for optimal dividend payment and risk control for a firm under consideration of the time value of ruin. Wuhan Univ. J. Nat. Sci. 15, 369–374 (2010). https://doi.org/10.1007/s11859-010-0668-9

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  • DOI: https://doi.org/10.1007/s11859-010-0668-9

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