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Explicit Solution of the Optimal Reinsurance-Investment Problem with Promotion Budget

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  • Sheng Delei

    (Faculty of Applied Mathematics, Shanxi University of Finance & Economics, Taiyuan, 030006, China)

Abstract

The lack of surrendering profits to policy holder leads to the development of this paper. For an insurer with promotion budget, both the interests of the insurance company and policy-holder are given a balance. In addition, promotion budget is introduced into the risk management process, which makes cheap reinsurance more fair. This article aims at obtaining the explicit strategy and value function for an investment-reinsurance problem under stochastic interest rates. Applying stochastic control technique, a Hamilton-Jacobi-Bellman (HJB) equation is established. The closed-form solution for the HJB equation and a verification theorem are obtained. At last, some numerical analysises illustrate the impacts of different parameters.

Suggested Citation

  • Sheng Delei, 2016. "Explicit Solution of the Optimal Reinsurance-Investment Problem with Promotion Budget," Journal of Systems Science and Information, De Gruyter, vol. 4(2), pages 131-148, April.
    • Handle: RePEc:bpj:jossai:v:4:y:2016:i:2:p:131-148:n:3
    DOI: 10.21078/JSSI-2016-131-18
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    References listed on IDEAS

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