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On a mean reverting dividend strategy with Brownian motion

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  • Avanzi, Benjamin
  • Wong, Bernard
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    Abstract

    In actuarial risk theory, the introduction of dividend pay-outs in surplus models goes back to de Finetti (1957). Dividend strategies that can be found in the literature often yield pay-out patterns that are inconsistent with actual practice. One issue is the high variability of the dividend payment rates over time. We aim at addressing that problem by specifying a dividend strategy that yields stable dividend pay-outs over time.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167668712000509
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    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 51 (2012)
    Issue (Month): 2 ()
    Pages: 229-238

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    Handle: RePEc:eee:insuma:v:51:y:2012:i:2:p:229-238

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    Web page: http://www.elsevier.com/locate/inca/505554

    Related research

    Keywords: Dividends; Brownian motion; Ornstein–Uhlenbeck process; Mean reverting;

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    1. Alon Brav & John R. Graham & Campbell R. Harvey & Roni Michaely, 2003. "Payout Policy in the 21st Century," NBER Working Papers 9657, National Bureau of Economic Research, Inc.
    2. Sheldon Lin, X., 1998. "Double barrier hitting time distributions with applications to exotic options," Insurance: Mathematics and Economics, Elsevier, vol. 23(1), pages 45-58, October.
    3. Asmussen, Soren & Taksar, Michael, 1997. "Controlled diffusion models for optimal dividend pay-out," Insurance: Mathematics and Economics, Elsevier, vol. 20(1), pages 1-15, June.
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