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Analysis of a threshold dividend strategy for a MAP risk model

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  • Andrei Badescu
  • Steve Drekic
  • David Landriault

Abstract

We consider a class of Markovian risk models in which the insurer collects premiums at rate c1(c2) whenever the surplus level is below (above) a constant threshold level b. We derive the Laplace-Stieltjes transform (LST) of the distribution of the time to ruin as well as the LST (with respect to time) of the joint distribution of the time to ruin, the surplus prior to ruin, and the deficit at ruin. By interpreting that the insurer pays dividends continuously at rate c1−c2 whenever the surplus level is above b, we also derive the expected discounted value of total dividend payments made prior to ruin. Our results are obtained by making use of an existing connection which links an insurer's surplus process to an embedded fluid flow process.

Suggested Citation

  • Andrei Badescu & Steve Drekic & David Landriault, 2007. "Analysis of a threshold dividend strategy for a MAP risk model," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2007(4), pages 227-247.
    • Handle: RePEc:taf:sactxx:v:2007:y:2007:i:4:p:227-247
    DOI: 10.1080/03461230701396474
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