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Optimal combined dividend and reinsurance policies under interest rate in Lévy markets

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  • Sivuyile W. Mgobhozi
  • Eriyoti Chikodza

Abstract

A combined dividend and risk control problem is presented and investigated in this paper. The risk of the insurance firm is controlled by using a proportional reinsurance policy. It is considered that the evolution of the cash reserves of the firm is driven by a generalised Itô-Lévy process. The surplus cash reserves earn interest at a constant rate. The objective of the firm is to maximise the total expected discounted dividends paid out to share holders. The situation is modelled as an impulse-classical control problem. We manage to construct the value function and the optimal impulse control. The existence and uniqueness of an optimal classical control is proved.

Suggested Citation

  • Sivuyile W. Mgobhozi & Eriyoti Chikodza, 2017. "Optimal combined dividend and reinsurance policies under interest rate in Lévy markets," International Journal of Mathematics in Operational Research, Inderscience Enterprises Ltd, vol. 10(1), pages 69-83.
  • Handle: RePEc:ids:ijmore:v:10:y:2017:i:1:p:69-83
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