Optimal Investment in a Dual Risk Model

Arash Fahim and Lingjiong Zhu ()
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Arash Fahim: Department of Mathematics, Florida State University, Tallahassee, FL 32306, USA
Lingjiong Zhu: Department of Mathematics, Florida State University, Tallahassee, FL 32306, USA

Risks, 2023, vol. 11, issue 2, 1-29

Abstract: Dual risk models are popular for modeling a venture capital or high-tech company, for which the running cost is deterministic and the profits arrive stochastically over time. Most of the existing literature on dual risk models concentrates on the optimal dividend strategies. In this paper, we propose to study the optimal investment strategy on research and development for the dual risk models to minimize the ruin probability of the underlying company. We will also study the optimization problem when, in addition, the investment in a risky asset is allowed.

Keywords: dual risk model; minimizing ruin probability; optimal investment (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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