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Reinsurance control in a model with liabilities of the fractional Brownian motion type

Author

Listed:
  • N. E. Frangos
  • S. D. Vrontos
  • A. N. Yannacopoulos

Abstract

We propose a model for reinsurance control for an insurance firm in the case where the liabilities are driven by fractional Brownian motion, a stochastic process exhibiting long‐range dependence. The problem is transformed to a nonlinear programming problem, the solution of which provides the optimal reinsurance policy. The effect of various parameters of the model, such as the safety loading of the reinsurer and the insurer, the Hurst parameter, etc. on the optimal reinsurance program is studied in some detail. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • N. E. Frangos & S. D. Vrontos & A. N. Yannacopoulos, 2007. "Reinsurance control in a model with liabilities of the fractional Brownian motion type," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 23(5), pages 403-428, September.
    • Handle: RePEc:wly:apsmbi:v:23:y:2007:i:5:p:403-428
    DOI: 10.1002/asmb.680
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    Cited by:

    1. Zhang, H.Y. & Bai, L.H. & Zhou, A.M., 2009. "Insurance control for classical risk model with fractional Brownian motion perturbation," Statistics & Probability Letters, Elsevier, vol. 79(4), pages 473-480, February.

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