Optimal Investment in a Dual Risk Model

32 Pages Posted: 18 Oct 2015

See all articles by Arash Fahim

Arash Fahim

Florida State University - Department of Mathematics

Lingjiong Zhu

University of Minnesota - Minneapolis

Date Written: October 16, 2015

Abstract

Dual risk models are popular for modeling a venture capital or high tech company, for which the running cost is deterministic and the profits arrive stochastically over time. Most of the existing literature on dual risk models concentrated on the optimal dividend strategies. In this paper, we propose to study the optimal investment strategy on research and development for the dual risk models to minimize the ruin probability of the underlying company. We will also study the optimization problem when in addition the investment in a risky asset is allowed.

Keywords: dual risk model, minimizing ruin probability, optimal investment

Suggested Citation

Fahim, Arash and Zhu, Lingjiong, Optimal Investment in a Dual Risk Model (October 16, 2015). Available at SSRN: https://ssrn.com/abstract=2675229 or http://dx.doi.org/10.2139/ssrn.2675229

Arash Fahim

Florida State University - Department of Mathematics ( email )

Tallahassee, FL 32306
United States

Lingjiong Zhu (Contact Author)

University of Minnesota - Minneapolis ( email )

206 Church Street SE
Minneapolis, MN 55455
United States

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