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An optimal continuous type investment policy for the surplus in a risk modelopen access

Authors
Choi, Seung KyoungLee, Eui Yong
Issue Date
Jan-2018
Publisher
Korean Statistical Society
Keywords
Continuous type investment policy; Long-run average cost; Optimal investment rate; Risk model; Surplus process
Citation
Communications for Statistical Applications and Methods, v.25, no.1, pp 91 - 97
Pages
7
Journal Title
Communications for Statistical Applications and Methods
Volume
25
Number
1
Start Page
91
End Page
97
URI
https://scholarworks.sookmyung.ac.kr/handle/2020.sw.sookmyung/2120
DOI
10.29220/CSAM.2018.25.1.091
ISSN
2287-7843
Abstract
In this paper, we show that there exists an optimal investment policy for the surplus in a risk model, in which the surplus is continuously invested to other business at a constant rate a > 0, whenever the level of the surplus exceeds a given threshold V > 0. We assign, to the risk model, two costs, the penalty per unit time while the level of the surplus being under V > 0 and the opportunity cost per unit time by keeping a unit amount of the surplus. After calculating the long-run average cost per unit time, we show that there exists an optimal investment rate a* > 0 which minimizes the long-run average cost per unit time, when the claim amount follows an exponential distribution. © 2018 The Korean Statistical Society, and Korean International Statistical Society.
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