Optimal Stopping of a Risk Process when Claims are Covered immediately

Bogdan K. Muciek and Krzysztof J. Szajowski

MPRA Paper from University Library of Munich, Germany

Abstract: The optimal stopping problem for the risk process with interests rates and when claims are covered immediately is considered. An insurance company receives premiums and pays out claims which have occured according to a renewal process and which have been recognized by them. The capital of the company is invested at some interest rate, the size of claims increase at the given rate according to inflation process. The immediate payment of claims decreases the company investment by a given rate. The aim is to find the stopping time which maximizes the capital of the company. The improvement to the known models by taking into account different scheme of claims payment and the possibility of rejection of the request by the insurance company is made. It leads to essentially new risk process and the solution of optimal stopping probleln is different.

Keywords: Risk reserve process; optimal stopping; dynamic programming; interest rates (search for similar items in EconPapers)
JEL-codes: C44 C61 D81 G32 (search for similar items in EconPapers)
Date: 2006, Revised 2007
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Citations: View citations in EconPapers (1)

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