Optimal Reinsurance-Investment and Dividends Problem with Fixed Transaction Costs

Abstract

Abstract. In this paper, we consider the dividend optimization problem for a financial corporation with fixed transaction costs. Besides the dividend control, the financial corporation takes proportional reinsurance to reduce risk and invests its reserve in a financial market consisting of a risk-free asset (bond) and a risky asset (stock). Because of the presence of the fixed transaction costs, the problem becomes a mixed classical-impulse stochastic control problem. We solve this problem explicitly and construct the value function together with the optimal policy.