Numerical method for a compound Poisson risk model with liquid reserves and proportional investment

Abstract

In this paper, a classical risk model with liquid reserves and proportional investment is considered, and the expected total discounted dividend before ruin of insurance companies under the threshold dividend strategy is studied. First, the integral differential equations of the expected total discounted dividend before ruin satisfying certain boundary conditions is derived. Second, since the explicit solutions of the equations cannot be obtained, the numerical approximation solutions are obtained by the sinc approximation method. Finally, we discuss the effects of parameters such as risk capital ratio and liquid reserve on the expected total discounted dividend before ruin by some examples.

Keywords

• liquid reserves
• threshold strategy
• proportional investment
• dividends paid up to ruin
• sinc numerical method