Author： Choulli T. Taksar M. Zhou X.Y.
Publisher： Routledge Ltd
ISSN： 1469-7688
Source： Quantitative Finance, Vol.1, Iss.6, 2001-06, pp. : 573-596
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Abstract
We consider a problem of risk control and dividend optimization for a financial corporation facing a constant liability payment. More specifically we investigate the case of excess-of-loss reinsurance for an insurance company. In this scheme the insurance company diverts a part of its premium stream to another company, the reinsurer, in exchange for an obligation to pick up that amount of each claim which exceeds a certain level a . The objective of the insurer is to maximize the expected present value of total future dividend pay-outs. We consider cases when there is restriction on the rate of dividend pay-outs and when there is no restriction. In both cases we describe explicitly the optimal return function as well as the optimal policy.
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