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Optimal control of risk process in a regime-switching environment

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  • Chao Zhu

Abstract

This paper is concerned with cost optimization of an insurance company. The surplus of the insurance company is modeled by a controlled regime switching diffusion, where the regime switching mechanism provides the fluctuations of the random environment. The goal is to find an optimal control that minimizes the total cost up to a stochastic exit time. A weaker sufficient condition than that of (Fleming and Soner 2006, Section V.2) for the continuity of the value function is obtained. Further, the value function is shown to be a viscosity solution of a Hamilton-Jacobian-Bellman equation.

Suggested Citation

  • Chao Zhu, 2010. "Optimal control of risk process in a regime-switching environment," Papers 1009.3247, arXiv.org, revised Dec 2010.
    • Handle: RePEc:arx:papers:1009.3247
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    File URL: http://arxiv.org/pdf/1009.3247
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    Cited by:

    1. Runhuan Feng & Hans Volkmer & Shuaiqi Zhang & Chao Zhu, 2011. "Optimal Dividend Payments for the Piecewise-Deterministic Poisson Risk Model," Papers 1106.2781, arXiv.org, revised Nov 2014.

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