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Optimal insurance demand under marked point processes shocks: a dynamic programming duality approach

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  • Mohamed Mnif

Abstract

We study the stochastic control problem of maximizing expected utility from terminal wealth under a non-bankruptcy constraint. The wealth process is subject to shocks produced by a general marked point process. The problem of the agent is to derive the optimal insurance strategy which allows "lowering" the level of the shocks. This optimization problem is related to a suitable dual stochastic control problem in which the delicate boundary constraints disappear. We characterize the dual value function as the unique viscosity solution of the corresponding a Hamilton Jacobi Bellman Variational Inequality (HJBVI in short).

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  • Mohamed Mnif, 2010. "Optimal insurance demand under marked point processes shocks: a dynamic programming duality approach," Papers 1008.5058, arXiv.org.
    • Handle: RePEc:arx:papers:1008.5058
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    References listed on IDEAS

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    1. Hojgaard, Bjarne & Taksar, Michael, 1998. "Optimal proportional reinsurance policies for diffusion models with transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 22(1), pages 41-51, May.
    2. Nicole El Karoui & Monique Jeanblanc-Picqué, 1998. "Optimization of consumption with labor income," Finance and Stochastics, Springer, vol. 2(4), pages 409-440.
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    Cited by:

    1. Mohamed Mnif, 2010. "Numerical methods for optimal insurance demand under marked point processes shocks," Papers 1009.0635, arXiv.org.

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