Numerical Method for a Perturbed Risk Model with Proportional Investment

Chunwei Wang (), Naidan Deng and Silian Shen
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Chunwei Wang: School of Mathematics and Statistics, Henan University of Science and Technology, Luoyang 471023, China
Naidan Deng: School of Mathematics and Statistics, Henan University of Science and Technology, Luoyang 471023, China
Silian Shen: School of Mathematics and Statistics, Henan University of Science and Technology, Luoyang 471023, China

Mathematics, 2022, vol. 11, issue 1, 1-27

Abstract: In this paper, we study the perturbed risk model with a threshold dividend strategy and proportional investment. The insurance companies are allowed to invest their surplus in a financial market consisting of a risk-free asset and a risky asset in fixed proportions; the risky assets are modeled by the jump-diffusion process. Firstly, using the theory of the stochastic process and stochastic analysis, we obtained the integro-differential equations satisfied by the expected discounted dividend payments and the discounted penalty function. Secondly, we obtained the numerical approximate solutions of the integro-differential equations through the sinc method, since the analytical solutions of them are not easy to obtain, and we found that the error is within a manageable range. Finally, we considered some numerical examples where the claim sizes follow an exponential distribution, a mixture of two exponential distributions or the lognormal distribution in detail, and explored how perturbations and proportional investment affect dividends and ruin probability. Moreover, sensitive analysis showed that the proportion of the risky investment, the diffusion coefficient, the distribution of the claims and the positive jump in the risky assets investment all have explicit impacts on dividends and ruin probability.

Keywords: dividend payments; penalty function; integro-differential equations; perturbed risk process; proportional investment; sinc numerical method (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
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