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Optimal proportional reinsurance policies for diffusion models

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  • B. Højgaard
  • M. Taksar

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.

Suggested Citation

  • B. Højgaard & M. Taksar, 1998. "Optimal proportional reinsurance policies for diffusion models," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 1998(2), pages 166-180.
    • Handle: RePEc:taf:sactxx:v:1998:y:1998:i:2:p:166-180
    DOI: 10.1080/03461238.1998.10414000
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