Optimal risk and liquidity management with costly refinancing opportunities

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      <subfield code="a">Barth, Andrea</subfield>
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      <subfield code="a">Optimal risk and liquidity management with costly refinancing opportunities</subfield>
      <subfield code="c">Andrea Barth,  Santiago Moreno-Bromberg</subfield>
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      <subfield code="a">In this paper we study risk and liquidity management decisions within an insurance firm. Risk management corresponds to decisions regarding proportional reinsurance, whereas liquidity management has two components: distribution of dividends and costly equity issuance. Contingent on whether proportional or fixed costs of reinvestment are considered, singular stochastic control or stochastic impulse control techniques are used to seek strategies that maximize the firm value. We find that, in a proportional-costs setting, the optimal strategies are always mixed in terms of risk management and refinancing. In contrast, when fixed issuance costs are too high relative to the firm¿s profitability, optimal management does not involve refinancing. We provide analytical specifications of the optimal strategies, as well as a qualitative analysis of the interaction between refinancing and risk management.</subfield>
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      <subfield code="w">MAP20077100574</subfield>
      <subfield code="t">Insurance : mathematics and economics</subfield>
      <subfield code="d">Oxford : Elsevier, 1990-</subfield>
      <subfield code="x">0167-6687</subfield>
      <subfield code="g">07/07/2014 Volumen 57 Número 1 - julio 2014 </subfield>
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