Optimal dividend distribution under Markov-regime switching
Martijn Pistorius
(King's College London)
12/02/08
The study of optimal dividend policies
for an insurance company forms a classical research topic in the actuarial literature. It is well known that premiums of life insurance products such as pensions and annuities are highly sensitive to changes in interest rates, and that premiums of property and casualty insurance policies vary with claim frequencies and claim amounts. The aforementioned factors are simultaneously influenced by a random external environment which represents the state (that is, regime) of an economy. For example, changes in monetary policies and business cycles may cause interest rates and hence premiums to fluctuate. The aim of this talk is to investigate the influence of such changes on the optimal dividend distribution.
A common model for the insurance reserves in the economic environment is a Markov-modulated Cramér-Lundberg process or Markov-modulated Brownian motion -- we will adopt the latter as model in this talk.
We will assume that we can explicitly observe the states of the underlying Markov chain. In this setting we will explicitly solve the corresponding singular control problem.
This is joint work with Zhengjun Jiang.
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[Last modified: Feb. 5th 2008 by Erik Baurdoux]
