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Optimal excess-of-loss reinsurance and dividend payments with both transaction costs and taxes

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Author Info

  • Lihua Bai
  • Junyi Guo
  • Huayue Zhang
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    Abstract

    In this paper we study the optimal excess-of-loss reinsurance and dividend strategy for maximizing the expected total discounted dividends received by shareholders until ruin time. Transaction costs and taxes are required when dividends occur. The problem is formulated as a stochastic impulse control problem. By solving the corresponding quasi-variational inequality, we obtain analytical solutions for the optimal return function and the optimal strategy.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/14697680902968005
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

    Volume (Year): 10 (2010)
    Issue (Month): 10 ()
    Pages: 1163-1172

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    Handle: RePEc:taf:quantf:v:10:y:2010:i:10:p:1163-1172

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    Web page: http://www.tandfonline.com/RQUF20

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    Related research

    Keywords: Transaction costs; Stochastic processes; Dynamic programming; Insurance mathematics; Optimal policies;

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    Cited by:
    1. Chen, Mi & Peng, Xiaofan & Guo, Junyi, 2013. "Optimal dividend problem with a nonlinear regular-singular stochastic control," Insurance: Mathematics and Economics, Elsevier, vol. 52(3), pages 448-456.
    2. Peng, Xiaofan & Chen, Mi & Guo, Junyi, 2012. "Optimal dividend and equity issuance problem with proportional and fixed transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 576-585.
    3. Yao, Dingjun & Yang, Hailiang & Wang, Rongming, 2014. "Optimal risk and dividend control problem with fixed costs and salvage value: Variance premium principle," Economic Modelling, Elsevier, vol. 37(C), pages 53-64.

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