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Linearisation techniques and the dual algorithm for a class of mixed singular/continuous control problems in reinsurance. Part II: Numerical aspects

Author

Listed:
  • Goreac, Dan
  • Li, Juan
  • Wang, Pangbo
  • Xu, Boxiang

Abstract

This paper is intended as a companion to [12] and focuses on the numerical implementations of the method in the context of insurance problems with mixed controls: reinsurance acting as continuous control, and capital injection and dividend payment acting as singular ones. The aim is twofold. On the one hand, we provide a comparison of the output of our method in terms of the optimal value against two benchmarks. The first benchmark is provided by [4] in the no-reinsurance setting and when the claims are exponentially distributed. The second benchmark refers to [8] where capital injections are not permitted, but different claim distributions can be employed. On the other hand, we illustrate the improvement of the models in [8] when capital injection is allowed. We also look into the effect of reinsurance in the model [4]. Several cases for the equity cost parameter are discussed as are the boundary (or limit) situations.

Suggested Citation

  • Goreac, Dan & Li, Juan & Wang, Pangbo & Xu, Boxiang, 2024. "Linearisation techniques and the dual algorithm for a class of mixed singular/continuous control problems in reinsurance. Part II: Numerical aspects," Applied Mathematics and Computation, Elsevier, vol. 473(C).
    • Handle: RePEc:eee:apmaco:v:473:y:2024:i:c:s0096300324001279
    DOI: 10.1016/j.amc.2024.128655
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