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| Title: | Flow of Dividends under a constant force of Interest |
| Authors: | Kasozi, Juma
Paulsen, Jostein |
| Keywords: | Risk theory
Volterra equation
block-by-block method
barrier strategy
Dividends |
| Issue Date: | 2005 |
| Publisher: | Science Publications |
| Citation: | American Journal of Applied Sciences |
| Abstract: | This study addresses the issue of maximisation 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 Cramr-Lundberg model in the insurance literature. To enhance his financial base, the
insurer invests into 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-byblock
method of Paulsen et al.[1] in conjuction 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 maximises the dividends. In the absence of the financial world, the
analytical solution has been used to assess the accuracy of our results. |
| URI: | http://hdl.handle.net/123456789/74 |
| ISSN: | 1546-9239 |
| Appears in Collections: | Research Articles (Science)
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Files in This Item:
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Description |
Size | Format |
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| ajas2101389-1394.pdf | | 158Kb | Adobe PDF | View/Open |
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