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Optimal dividend and investing control of an insurance company with higher solvency constraints

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  • Liang, Zongxia
  • Huang, Jianping
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    Abstract

    This paper considers the optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present value of the dividend pay-outs until the time of bankruptcy. This paper aims at describing the optimal return function as well as the optimal policy. As a by-product, the paper theoretically sets a risk-based capital standard to ensure the capital requirement that can cover the total risk.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167668711000898
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    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 49 (2011)
    Issue (Month): 3 ()
    Pages: 501-511

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    Handle: RePEc:eee:insuma:v:49:y:2011:i:3:p:501-511

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    Web page: http://www.elsevier.com/locate/inca/505554

    Related research

    Keywords: Optimal dividend policy; Optimal return function; Solvency; Stochastic regular-singular control; Proportional reinsurance; Probability of bankruptcy; Stochastic differential equations;

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    Cited by:
    1. He, Lin & Liang, Zongxia, 2013. "Optimal investment strategy for the DC plan with the return of premiums clauses in a mean–variance framework," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 643-649.
    2. Guan, Guohui & Liang, Zongxia, 2014. "Optimal reinsurance and investment strategies for insurer under interest rate and inflation risks," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 105-115.
    3. He, Lin & Liang, Zongxia, 2013. "Optimal dynamic asset allocation strategy for ELA scheme of DC pension plan during the distribution phase," Insurance: Mathematics and Economics, Elsevier, vol. 52(2), pages 404-410.
    4. Guan, Huiqi & Liang, Zongxia, 2014. "Viscosity solution and impulse control of the diffusion model with reinsurance and fixed transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 109-122.

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