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    Optimal implementation delay of taxation with trade-off for spectrally negative Lévy risk processes

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    Author
    Wang, W; Wu, X; Chi, C
    Date
    2020-09-02
    Source Title
    European Actuarial Journal
    Publisher
    Springer Verlag
    University of Melbourne Author/s
    Wu, Xueyuan
    Affiliation
    Economics
    Metadata
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    Document Type
    Journal Article
    Citations
    Wang, W., Wu, X. & Chi, C. (2020). Optimal implementation delay of taxation with trade-off for spectrally negative Lévy risk processes. European Actuarial Journal, Forthcoming, https://doi.org/10.1007/s13385-020-00246-x.
    Access Status
    This item is embargoed and will be available on 2021-09-02
    URI
    http://hdl.handle.net/11343/253885
    DOI
    10.1007/s13385-020-00246-x
    Abstract
    In this paper we consider two cases of optimal implementation delay of taxation with trade-off under spectrally negative Lévy insurance risk processes. In the first case, we assume that the insurance company starts to pay tax only when its surplus level reaches a certain level, and at the termination time of the business there is a terminal value incurred to the company. A method is developed to determine the optimal starting-tax surplus level at which the total expected discounted value of all tax payments up to the termination time plus the discounted terminal value is maximized. In the second case, the company still pays tax subject to a starting-tax surplus level, but with capital injections to prevent bankruptcy. The total expected discounted value of tax payments minus the total discounted capital injection costs is maximized to determine the optimal starting-tax surplus level. Numerical examples are given at the end to illustrate the existence of positive optimal starting-tax surplus levels for both cases considered in this paper.

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