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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| Format: | Article |
| Language: | English |
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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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| author | De-Lei Sheng |
| author_facet | De-Lei Sheng |
| author_sort | De-Lei Sheng |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-0d47b4aa436547e4b184d5657aefee15 |
| institution | Kabale University |
| issn | 1687-9120 1687-9139 |
| language | English |
| publishDate | 2016-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Advances in Mathematical Physics |
| spelling | doaj-art-0d47b4aa436547e4b184d5657aefee152025-02-03T05:47:23ZengWileyAdvances in Mathematical Physics1687-91201687-91392016-01-01201610.1155/2016/19678721967872Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek ModelDe-Lei Sheng0Faculty of Applied Mathematics, Shanxi University of Finance and Economics, Taiyuan 030006, ChinaUnlike 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.http://dx.doi.org/10.1155/2016/1967872 |
| spellingShingle | De-Lei Sheng Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model Advances in Mathematical Physics |
| title | Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model |
| title_full | Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model |
| title_fullStr | Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model |
| title_full_unstemmed | Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model |
| title_short | Explicit Solution of Reinsurance-Investment Problem for an Insurer with Dynamic Income under Vasicek Model |
| title_sort | explicit solution of reinsurance investment problem for an insurer with dynamic income under vasicek model |
| url | http://dx.doi.org/10.1155/2016/1967872 |
| work_keys_str_mv | AT deleisheng explicitsolutionofreinsuranceinvestmentproblemforaninsurerwithdynamicincomeundervasicekmodel |