Explicit Solution of the Optimal Reinsurance-Investment Problem with Promotion Budget

Sheng Delei ()
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Sheng Delei: Faculty of Applied Mathematics, Shanxi University of Finance & Economics, Taiyuan, 030006, China

Journal of Systems Science and Information, 2016, vol. 4, issue 2, 131-148

Abstract: The lack of surrendering profits to policy holder leads to the development of this paper. For an insurer with promotion budget, both the interests of the insurance company and policy-holder are given a balance. In addition, promotion budget is introduced into the risk management process, which makes cheap reinsurance more fair. This article aims at obtaining the explicit strategy and value function for an investment-reinsurance problem under stochastic interest rates. Applying stochastic control technique, a Hamilton-Jacobi-Bellman (HJB) equation is established. The closed-form solution for the HJB equation and a verification theorem are obtained. At last, some numerical analysises illustrate the impacts of different parameters.

Keywords: promotion budget; stochastic interest rates; power utility; HJB equation (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:4:y:2016:i:2:p:131-148:n:3

DOI: 10.21078/JSSI-2016-131-18

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