Flow of Dividends under a Constant Force of Interest | Science Publications

American Journal of Applied Sciences

Juma Kasozi¹  Jostein Paulsen¹ 

关键词: Risk theory;    Volterra equation;    block-by-block method;    barrier strategy;    dividends;   

DOI  :  10.3844/ajassp.2005.1389.1394

学科分类：自然科学（综合）

来源: Science Publications

【 摘 要 】

This study addresses the issue of maximization of dividends of an insurer whose portfolio is exposed to insurance risk. The insurance risk arises from the classical surplus process commonly known as the Cramér-Lundberg model in the insurance literature. To enhance his financial base, the insurer invests in a risk free asset whose price dynamics are governed by a constant force of interest. We derive a linear Volterra integral equation of the second kind and apply an order four Block-by-block method of Paulsen et al.^[1] in conjunction with the Simpson rule to solve the Volterra integral equations for each chosen barrier thus generating corresponding dividend value functions. We have obtained the optimal barrier that maximizes the dividends. In the absence of the financial world, the analytical solution has been used to assess the accuracy of our results.

【 授权许可】

Unknown