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

Jiaqin Wei (), Hailiang Yang () and Rongming Wang ()
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Jiaqin Wei: East China Normal University
Hailiang Yang: The University of Hong Kong
Rongming Wang: East China Normal University

Journal of Optimization Theory and Applications, 2010, vol. 147, issue 2, No 9, 358-377

Abstract: 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.

Keywords: Regime switching; Dividend strategy; Proportional reinsurance; Viscosity solution; Quasi-variational inequality (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s10957-010-9726-x

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