RICING INSURANCE IN ORDER TO MINIMIZING THE EXPECTED LOSS IN WEALTH VIA OPTIMAL CONTROL
DOI:
https://doi.org/10.32461/2226-3209.1.2018.178778Abstract
Abstract. In this paper we are interested in Pricing insurance in order to minimizing the expected loss in
wealth via optimal control. The objective is to find the policy which maximizes the total wealth in company insurances. For this purpose, First, a dynamic model is introduced to describe the process of receiving premium and paying claims. Then, we introduce the premium variable as the problem control variable. Next, we define an appropriate objective function for the control variable and state variables in order to reduce expected losses and increase the wealth. In the end, one of the main variables is estimated by statistical methods and we solve the optimal control problem by PMP method and finally, numerical example are presented.
Keywords: Optimal control, Premium, Dynamical systems, expected loss, Optimization.
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