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Optimal combining quota-share and excess of loss reinsurance to maximize the expected utility

  • Zhibin LiangEmail author
  • Junyi Guo
Article

Abstract

In this paper, from an insurer’s point of view, we consider the optimal combining quota-share and excess of loss reinsurance to maximize the expected exponential utility from terminal wealth. By stochastic control theory and the corresponding Hamilton-Jacobi-Bellman equation, we derive the closed form expressions of the optimal strategies and value function not only for the diffusion approximation risk model but also for the jump-diffusion risk model. We also conclude that, under some conditions, there exists a pure excess of loss reinsurance strategy which is better than any combinational reinsurance strategy.

Keywords

Expected utility Diffusion approximation Compound Poisson process Hamilton-Jacobi-Bellman equation Quota-share reinsurance Excess of loss reinsurance 

Mathematics Subject Classification (2000)

93E20 91B30 

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Copyright information

© Korean Society for Computational and Applied Mathematics 2010

Authors and Affiliations

  1. 1.School of Mathematical SciencesNanjing Normal UniversityJiangsuChina
  2. 2.School of Mathematical SciencesNankai UniversityTianjinChina

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