Minimizing the probability of ruin: Two riskless assets with transaction costs and proportional reinsurance

Xiaoqing Liang and Virginia R. Young

Statistics & Probability Letters, 2018, vol. 140, issue C, 167-175

Abstract: We compute the optimal investment and reinsurance strategy for an insurance company that wishes to minimize its probability of ruin, when the risk process follows Brownian motion with drift and when the insurer can buy proportional reinsurance. The financial market in which the insurer invests consists of two riskless assets. One riskless asset is a money market, and the insurer pays claims from the money market account. The other riskless asset is a bond that earns a higher interest rate than the money market, but buying and selling bonds are subject to proportional transaction costs.

Keywords: Probability of ruin; Optimal investment; Optimal reinsurance; Transaction costs; Stochastic control (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.spl.2018.05.005

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