A hybrid deep learning method for optimal insurance strategies: Algorithms and convergence analysis

This paper develops a hybrid deep learning approach to find optimal reinsurance, investment, and dividend strategies for an insurance company in a complex stochastic system. A jump-diffusion regime-switching model with infinite horizon subject to ruin is formulated for the surplus process. A Markov chain approximation and stochastic approximation-based iterative deep learning algorithm is developed to study this type of infinite-horizon optimal control problems. Approximations of the optimal controls are obtained by using deep neural networks. The framework of Markov chain approximation plays a key role in building iterative algorithms and finding initial values. Stochastic approximation is used to search for the optimal parameters of neural networks in a bounded region determined by the Markov chain approximation method. The convergence of the algorithm is proved and the rate of convergence is provided. (C) 2020 Elsevier B.V. All rights reserved.