Free boundary problem for a fully nonlinear and degenerate parabolic equation in an angular domain.

Abstract This paper concerns with the problem of how to running an insurance company to maximize his total discounted expected dividends. In our model, the dividend rate is limited in [ 0 , M ] and the company is allowed to transfer any proportion of risk by reinsuring. So there are two strategies which we call dividend strategy and reinsurance strategy. The objective function and the corresponding optimal two strategies are the solution and the two free boundaries of the following Barenblatt parabolic equation v t − max 0 ≤ a ≤ 1 ⁡ (1 2 a 2 σ 2 v x x + a μ v x) + c v − max 0 ≤ l ≤ M ⁡ [ (1 − v x) l ] = 0 under certain boundary conditions on an angular domain Q T = { (x , t) | 0 < x < M t , 0 < t ≤ T }. The main effort is to analyze the properties of the solution and the free boundaries to show the optimal decision for the insurance company. [ABSTRACT FROM AUTHOR]