Lévy risk model with two-sided jumps and a barrier dividend strategy

Lijun Bo, Renming Song, Dan Tang, Yongjin Wang and Xuewei Yang ()

Insurance: Mathematics and Economics, 2012, vol. 50, issue 2, 280-291

Abstract: In this paper, we consider a general Lévy risk model with two-sided jumps and a constant dividend barrier. We connect the ruin problem of the ex-dividend risk process with the first passage problem of the Lévy process reflected at its running maximum. We prove that if the positive jumps of the risk model form a compound Poisson process and the remaining part is a spectrally negative Lévy process with unbounded variation, the Laplace transform (as a function of the initial surplus) of the upward entrance time of the reflected (at the running infimum) Lévy process exhibits the smooth pasting property at the reflecting barrier. When the surplus process is described by a double exponential jump diffusion in the absence of dividend payment, we derive some explicit expressions for the Laplace transform of the ruin time, the distribution of the deficit at ruin, and the total expected discounted dividends. Numerical experiments concerning the optimal barrier strategy are performed and new empirical findings are presented.

Keywords: Risk model; Barrier strategy; Lévy process; Two-sided jump; Time of ruin; Deficit; Expected discounted dividend; Optimal dividend barrier; Integro-differential operator; Double exponential distribution; Reflected jump-diffusions; Laplace transform (search for similar items in EconPapers)
JEL-codes: G22 G33 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:50:y:2012:i:2:p:280-291

DOI: 10.1016/j.insmatheco.2011.12.002

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