Optimal reinsurance with a rescuing procedure

Xudong Zeng

Insurance: Mathematics and Economics, 2010, vol. 46, issue 2, 397-405

Abstract: We consider a large insurance company whose reserve is modeled by a diffusion process. The management of the insurance company makes a decision on reinsurance in order to reduce the insurance risk. An optimal decision is the one which minimizes the expected time to reach a goal before the reserve reaches a ruin level. We introduce a rescuing procedure to deal with the case that the company is "too big to fail". We disclose that the optimal decision of the management heavily depends on how much time the company needs to wait for rescuing when it gets in trouble.

Keywords: Stochastic; control; Stochastic; differential; equations; Controlled; stochastic; processes; Proportional; reinsurance; Minimize; expected; time; Rescuing; procedure; Bailout (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:46:y:2010:i:2:p:397-405

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