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Simulating the Continuous Time Problem of Optimal Choice of New Business

M. Kelbert, I. Sazonov, Adam Shore

Quality Technology & Quantitative Management, Volume: 2, Issue: 2, Pages: 189 - 200

Swansea University Author: Adam Shore

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Abstract

This paper studies the use of simulation techniques to model complex situations in insurance business, where the risk process for old and new business are modeled by compound Poisson processes. The simulation is used to benchmark the solutions of the Hamilton-Jacobi-Bellman equation and to obtain re...

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Published in: Quality Technology & Quantitative Management
ISSN: 1684-3703
Published: Informa UK Limited 2005
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa15400
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Abstract: This paper studies the use of simulation techniques to model complex situations in insurance business, where the risk process for old and new business are modeled by compound Poisson processes. The simulation is used to benchmark the solutions of the Hamilton-Jacobi-Bellman equation and to obtain results in the case of distributions, where solutions cannot be obtained analytically. We also explore the problem of estimating the probability of achieving a target capital before ruin.
Keywords: Bellman equation, new business, optimisation, stochastic control
College: Faculty of Humanities and Social Sciences
Issue: 2
Start Page: 189
End Page: 200