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Stochastic Optimal Control of Investment and Dividend Payment Model under Debt Control with Time-Inconsistency

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  • Dan Zhu
  • Chuancun Yin

Abstract

This paper considers the optimal debt ratio, investment, and dividend payment policies for insurers with time-inconsistency. The surplus process of an insurance company is determined by the change of asset value and the change of liabilities. The asset can be invested in financial market which contains a risky asset and a risk-free asset, and when the insurer incurs a liability, he/she earns some premium. The objective is to maximize the expected nonconstant discounted utility of dividend payment until a determinate time. This is a time-inconsistent control problem. We obtain the modified HJB equation and the closed-form expressions for the optimal debt ratio, investment, and dividend payment policies under logarithmic utility.

Suggested Citation

  • Dan Zhu & Chuancun Yin, 2018. "Stochastic Optimal Control of Investment and Dividend Payment Model under Debt Control with Time-Inconsistency," Mathematical Problems in Engineering, Hindawi, vol. 2018, pages 1-8, July.
    • Handle: RePEc:hin:jnlmpe:7928953
    DOI: 10.1155/2018/7928953
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    Cited by:

    1. Dan Zhu & Cuixia Chen & Bing Liu, 2023. "Optimal Debt Ratio and Dividend Payment Policies for Insurers with Ambiguity," Mathematics, MDPI, vol. 12(1), pages 1-12, December.

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