In this study, the implication of mode of taxation and transaction costs charging on an insurer’s investment when dividends, consumption and reinsurance are involved was investigated. The associated H-J-B equation in the optimization problem was established using Ito’s lemma. The insurer’s surplus process was approximated by a Brownian motion with drift. Solving the H-J-B equations, obtained the explicit optimal strategies for cases when transaction costs and taxes are charged on the insurer’s investment in the risky asset only and the total investment. A relationship was established between both cases for the investment in the risky.
Loading....