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Maximisaton of Dividend Payouts under infinite Ruin Probability Constraints

Martha Nansubuga, Fred Mayambala, Charles Wilson Mahera, Juma Kasozi


This work deals with dividend maximization in an Insurance-investment model with ruin constraints. We consider two models, i.e the classical risk model with and without perturbed diffusion as the skeleton models for our work. The Insurance company is allowed to take advantage of Investment returns by investing in a risk free asset and a risky asset. The models have been formulated theoretically with all the parameters assumed to be unknown but from a certain set. We have derived Volterra Integral equations and solved them numerically using block-by-block methods. In each of the models, we have established the optimal barrier to use to pay dividends provided the ruin probability is no larger than the predetermined tolerance. In some cases, both light tailed and heavy tailed distributions have been used.


Infinite Ruin probability, HJB equation, Volterra equations, Block-by-block method, Dividends.

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