Volume 50, Number 4-5, October-December 2016
Special issue - Advanced Optimization Approaches and Modern OR-Applications
|Page(s)||845 - 855|
|Published online||03 November 2016|
Optimal investment with transaction costs and dividends for an insurer
1 School of Statistics, East China
Normal University, 500 Dongchuan
2 Finance Department, School of Business, Renmin University of China, 59 Zhongguancun Street, Beijing 100872, P.R. China.
Accepted: 12 February 2016
This paper investigates the optimal investment problems for an insurer whose reserve process is approximated by a diffusion model. The insurer is allowed to invest its wealth in the financial market consisting of one risk-free asset (bond) and one risky asset (stock). There are charges which equal to a fixed percentage of the amount transferred between the two assets. Under different criteria, we consider two optimization problems: one is maximizing the expected discounted utility of the dividends; the other is maximizing the insurer’s expected utility of the terminal wealth. We obtain that the optimal investment strategies are bang-bang strategies in both of the two problems. Numerical examples are given to illustrate our results.
Mathematics Subject Classification: 91B28 / 91B30
Key words: Optimal investment / transaction costs / partial differential equation / dividend
© EDP Sciences, ROADEF, SMAI 2016
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