Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model
Unlike traditionally used reserves models, this paper focuses on a reserve process with dynamic income to study the reinsurance-investment problem for an insurer under Vasicek stochastic interest rate model. The insurer’s dynamic income is given by the remainder after a dynamic reward budget being s...
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| Main Author: | |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2016-01-01
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| Series: | Advances in Mathematical Physics |
| Online Access: | http://dx.doi.org/10.1155/2016/1967872 |
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| Summary: | Unlike traditionally used reserves models, this paper focuses on a reserve process with dynamic income to study the reinsurance-investment problem for an insurer under Vasicek stochastic interest rate model. The insurer’s dynamic income is given by the remainder after a dynamic reward budget being subtracted from the insurer’s net premium which is calculated according to expected premium principle. Applying stochastic control technique, a Hamilton-Jacobi-Bellman equation is established and the explicit solution is obtained under the objective of maximizing the insurer’s power utility of terminal wealth. Some economic interpretations of the obtained results are explained in detail. In addition, numerical analysis and several graphics are given to illustrate our results more meticulous. |
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| ISSN: | 1687-9120 1687-9139 |