Obtaining the dividends-penalty identities by interpretation |
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Authors: | Hans U Gerber Hailiang Yang |
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Institution: | a Faculty of Business and Economics, University of Lausanne, CH-1015 Lausanne, Switzerland b Department of Statistics and Actuarial Science, The University of Hong Kong, Pokfulam Road, Hong Kong |
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Abstract: | The dividends-penalty identity is a relation between three functions: the discounted penalty function without dividends, the discounted penalty function if a barrier dividend strategy is applied, and the expected discounted dividends until ruin. The classical model of risk theory is modified in that the deterministic premiums are replaced by a compound Poisson process with exponential jumps. In this model, the dividends-penalty identity is new and can be derived by interpretation. Then the dividends-penalty identity in the classical model is obtained as a limit. |
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Keywords: | Dividends-penalty identity Discounted penalty function Barrier strategy Two-sided jump model |
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