2016（SCI）Optimal reinsurance with both proportional and fixed costs.pdfVIP

Statistics and Probability Letters 106 (2015) 134–141 Contents lists available at ScienceDirect Statistics and Probability Letters journal homepage: /locate/stapro Optimal reinsurance with both proportional and fixed costs Peng Li a , Ming Zhou b,∗, Chuancun Yin c a School of Insurance, Central University of Finance and Economics, Beijing 100081, China b China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, China c School of Mathematical Sciences, Qufu Normal University, Shandong 273165, China a r t i c l e i n f o a b s t r a c t Article history: This paper investigates an optimal reinsurance problem with both proportional and fixed Received 5 February 2015 transaction costs. Associated with a reinsurance, the proportional cost is usually charged by Received in revised form 9 June 2015 the reinsurer and the fixed cost occurs at the beginning of the reinsurance due to consultant Accepted 20 June 2015 commission. We describe an insurer’s original cash reserve process by a Brownian motion Available online 7 July 2015 with positive drift. The insurer aims to minimize its ruin probability by taking a dynamic reinsurance strategy. This leads to a mixed regular control and optimal stopping problem. Keywords: Irreversible reinsurance We solve it by establishing a connection with an optimal stopping problem. The value Mixed regular control/optimal stopping function and the optimal reinsurance strategy are obtained explici