Optimal proportional reinsurance policies for diffusion models

B. Højgaard and M. Taksar

Scandinavian Actuarial Journal, 1998, vol. 1998, issue 2, 166-180

Abstract: When applying a proportional reinsurance policy π the reserve of the insurance company is governed by a SDE =(aπ(t)u dt + aπ(t)σ dWt where {Wt} is a standard Brownian motion, µ, π, > 0 are constants and 0 ⩽ aπ(t) ⩽ 1 is the control process, where aπ(t) denotes the fraction, that is reinsured at time t. The aim of this paper is to find a policy that maximizes the return function Vπ(x) = where c > 0, τπ is the time of ruin and x refers to the initial reserve.

Date: 1998
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DOI: 10.1080/03461238.1998.10414000

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