Optimal implementation delay of taxation with trade-off for Lévy risk Processes

Abstract

In this paper we consider two problems on optimal implementation delay of taxation with trade-off for spectrally negative Lévy insurance risk processes. In the first case, we assume that an insurance company starts to pay tax when its surplus reaches a certain level $b$ and at the termination time of the business there is a terminal value incurred to the company. The total expected discounted value of tax payments plus the terminal value is maximized to obtain the optimal implementation level $b^{\ast }$. In the second case, the company still pays tax subject to an implementation level $a$ but with capital injections to prevent bankruptcy. The total expected discounted value of tax payments minus the capital injection costs is maximized to obtain the optimal implementation level $a^{\ast }$. Numerical examples are also given to illustrate the main results in this paper.