International Journal of Stochastic Analysis
Volume 2011 (2011), Article ID 190603, 13 pages
http://dx.doi.org/10.1155/2011/190603
Research Article

Impulse Control of Proportional Reinsurance with Constraints

Hui Meng1 and Tak Kuen Siu2

1China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, China
2Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University, Sydney, NSW 2109, Australia

Received 11 January 2011; Revised 17 May 2011; Accepted 21 June 2011

Academic Editor: Huyên Pham

Copyright © 2011 Hui Meng and Tak Kuen Siu. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We consider an insurance company whose surplus follows a diffusion process with proportional reinsurance and impulse dividend control. Our objective is to maximize expected discounted dividend payouts to shareholders of the company until the time of bankruptcy. To meet some essential requirements of solvency control (e.g., bankruptcy not soon), we impose some constraints on the insurance company's dividend policy. Under two types of constraints, we derive the value functions and optimal control policies of the company.