Maximization of the Survival Probability by Franchise and Deductible Amounts in the Classical Risk Model

Olena Ragulina ()
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Olena Ragulina: Donetsk National University

A chapter in Modern Stochastics and Applications, 2014, pp 287-300 from Springer

Abstract: Abstract We consider the classical risk model when an insurance company has the opportunity to adjust franchise amount continuously. The problem of optimal control by franchise amount is solved from viewpoint of survival probability maximization. We derive the Hamilton–Jacobi–Bellman equation for the optimal survival probability and prove the existence of a solution of this equation with certain properties. The verification theorem gives the connection between this solution and the optimal survival probability. Then we concentrate on the case of exponentially distributed claim sizes. Finally, we extend the obtained results to the problem of optimal control by deductible amount.

Keywords: Survival Probability; Bellman Equation; Predictable Process; Claim Size; Admissible Strategy (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spochp:978-3-319-03512-3_16

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DOI: 10.1007/978-3-319-03512-3_16

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