Faculty Publications

Optimal Reinsurance Under A Jump Diffusion Model

Document Type

Article

Keywords

Expo-nential utility, HJB equation, Jump diffusion, Proportional reinsurance, Stochastic control

Journal/Book/Conference Title

Stochastic Analysis, Stochastic Systems, and Applications to Finance

First Page

215

Last Page

230

Abstract

We study an optimal dynamic control problem of an insurance company whose wealth process is modeled by a jump diffusion. The company can purchase proportional reinsurance to reduce its risk level and invest all surplus in a risk free asset. The objective is to maximize the expected value of an exponential utility of the terminal wealth. We derive explicit optimal value function and find its associated reinsurance strategy.

Department

Department of Mathematics

Original Publication Date

1-1-2011

DOI of published version

10.1142/9789814355711_0009

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