Optimal Dividend Policies with Transaction Costs for a Class of Diffusion Processes

Lihua Bai; Jostein Paulsen

doi:10.1137/090773210

Optimal Dividend Policies with Transaction Costs for a Class of Diffusion Processes

Lihua Bai, Jostein Paulsen

Institut for Matematiske Fag

12 Citationer (Scopus)

Abstract

Finding optimal dividend strategies is a classical problem in the financial and actuarial literature. The idea is that the company wants to pay some of its surplus as dividends, and the problem is to find a dividend strategy that maximizes the expected total discounted dividends received by the shareholders until ruin. Here we generalize results in [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] in that the rate of growth of the surplus process is assumed to exceed the discounting factor whenever the surplus process is smaller than a fixed number λ. In [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] it was assumed th at this rate of growth is always less than or equal to the discounting factor. It turns out that thi s generalization makes the problem much more complicated, and a simple barrier strategy is no longer always optimal.

Originalsprog	Engelsk
Tidsskrift	SIAM Journal of Control and Optimization
Vol/bind	48
Udgave nummer	8
Sider (fra-til)	4987-5008
Antal sider	22
DOI	https://doi.org/10.1137/090773210
Status	Udgivet - 2010

Adgang til dokumentet

10.1137/090773210

Citationsformater

@article{9d4f9a78dc1b47c2998c820e18794adc,

title = "Optimal Dividend Policies with Transaction Costs for a Class of Diffusion Processes",

abstract = "Finding optimal dividend strategies is a classical problem in the financial and actuarial literature. The idea is that the company wants to pay some of its surplus as dividends, and the problem is to find a dividend strategy that maximizes the expected total discounted dividends received by the shareholders until ruin. Here we generalize results in [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] in that the rate of growth of the surplus process is assumed to exceed the discounting factor whenever the surplus process is smaller than a fixed number λ. In [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] it was assumed th at this rate of growth is always less than or equal to the discounting factor. It turns out that thi s generalization makes the problem much more complicated, and a simple barrier strategy is no longer always optimal.",

author = "Lihua Bai and Jostein Paulsen",

year = "2010",

doi = "10.1137/090773210",

language = "English",

volume = "48",

pages = "4987--5008",

journal = "SIAM Journal of Control and Optimization",

number = "8",

}

TY - JOUR

T1 - Optimal Dividend Policies with Transaction Costs for a Class of Diffusion Processes

AU - Bai, Lihua

AU - Paulsen, Jostein

PY - 2010

Y1 - 2010

N2 - Finding optimal dividend strategies is a classical problem in the financial and actuarial literature. The idea is that the company wants to pay some of its surplus as dividends, and the problem is to find a dividend strategy that maximizes the expected total discounted dividends received by the shareholders until ruin. Here we generalize results in [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] in that the rate of growth of the surplus process is assumed to exceed the discounting factor whenever the surplus process is smaller than a fixed number λ. In [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] it was assumed th at this rate of growth is always less than or equal to the discounting factor. It turns out that thi s generalization makes the problem much more complicated, and a simple barrier strategy is no longer always optimal.

AB - Finding optimal dividend strategies is a classical problem in the financial and actuarial literature. The idea is that the company wants to pay some of its surplus as dividends, and the problem is to find a dividend strategy that maximizes the expected total discounted dividends received by the shareholders until ruin. Here we generalize results in [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] in that the rate of growth of the surplus process is assumed to exceed the discounting factor whenever the surplus process is smaller than a fixed number λ. In [J. Paulsen, Adv. Appl. Probab., 39 (2007), pp. 669-689] it was assumed th at this rate of growth is always less than or equal to the discounting factor. It turns out that thi s generalization makes the problem much more complicated, and a simple barrier strategy is no longer always optimal.

U2 - 10.1137/090773210

DO - 10.1137/090773210

M3 - Journal article

VL - 48

SP - 4987

EP - 5008

JO - SIAM Journal of Control and Optimization

JF - SIAM Journal of Control and Optimization

IS - 8

ER -

Optimal Dividend Policies with Transaction Costs for a Class of Diffusion Processes

Abstract

Adgang til dokumentet

Fingeraftryk

Citationsformater