IDEAS home Printed from https://ideas.repec.org/a/taf/sactxx/v2018y2018i10p907-932.html
   My bibliography  Save this article

Minimizing capital injections by investment and reinsurance for a piecewise deterministic reserve process model

Author

Listed:
  • Michele Antonello
  • Luca Cipani
  • Wolfgang J. Runggaldier

Abstract

We consider the possibility for an insurance company to rely on capital injections to bring the reserve back to a given level if it has fallen below it and study the problem of dynamically choosing the reinsurance level and the investment in the financial market in order to minimize the expected discounted total amount of capital injection. The reserve process is described by a piecewise deterministic process, where the random discontinuities are triggered by the arrival of a claim or by a change in the prices of the risky assets in which the company invests. The capital injections, combined with the specific model, make the problem non-linear and difficult to solve via an HJB approach. The emphasis here is on making the actual computation of a solution possible by value iteration combined with an approximation based on discretization. This leads to a nearly optimal solution with an approximation that can be made arbitrarily precise. Numerical results show the feasibility of the proposed approach.

Suggested Citation

  • Michele Antonello & Luca Cipani & Wolfgang J. Runggaldier, 2018. "Minimizing capital injections by investment and reinsurance for a piecewise deterministic reserve process model," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2018(10), pages 907-932, November.
    • Handle: RePEc:taf:sactxx:v:2018:y:2018:i:10:p:907-932
    DOI: 10.1080/03461238.2018.1471001
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/03461238.2018.1471001
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/03461238.2018.1471001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:sactxx:v:2018:y:2018:i:10:p:907-932. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/sact .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.