The Gerber-Shiu expected discounted penalty function for risk processes with interest and a constant dividend barrier

Kam C. YUEN, Guojing WANG, Wai Keung LI

Research output: Contribution to journalArticles

44 Citations (Scopus)

Abstract

In this paper, we consider the classical surplus process with interest and a constant dividend barrier. Under constant interest, we derive an integro-differential equation for the Gerber–Shiu expected discounted penalty function. Following an idea of Lin, Willmot and Drekic [Lin, X.S., Willmot, G.E., Drekic, S., 2003. The classical risk model with a constant dividend barrier: Analysis of the Gerber–Shiu discounted penalty function. Insurance: Math. Econom. 33, 551–566], we obtain the solution to the integro-differential equation which is in the form of an infinite series. In some special cases with exponential claims, we are able to find closed-form expressions for the Gerber–Shiu expected discounted penalty function. Finally, we extend the integro-differential equation to the case where the surplus is invested in an investment portfolio with stochastic return on investments. Copyright © 2006 Elsevier Ltd. All rights reserved.
Original languageEnglish
Pages (from-to)104-112
JournalInsurance: Mathematics and Economics
Volume40
Issue number1
DOIs
Publication statusPublished - Jan 2007

Citation

Yuen, K. C., Wang, G., & Li, W. K. (2007). The Gerber-Shiu expected discounted penalty function for risk processes with interest and a constant dividend barrier. Insurance: Mathematics and Economics, 40(1), 104-112. doi: 10.1016/j.insmatheco.2006.03.002

Keywords

  • Barrier strategy
  • Compound Poisson
  • Integro-differential equation
  • Expected discounted penalty function
  • Time of ruin
  • Stochastic return on investments

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