On a periodic dividend barrier strategy in the dual model with continuous monitoring of solvency
AbstractWe consider the dual model, which is appropriate for modeling the surplus of companies with deterministic expenses and stochastic gains, such as pharmaceutical, petroleum or commission-based companies. Dividend strategies for this model that can be found in the literature include the barrier strategy (e.g., Avanzi et al., 2007) and the threshold strategy (e.g., Cheung, 2008), where dividend decisions are made continuously. While in practice the financial position of a company is typically monitored frequently, dividend decisions are only made periodically along with the publication of its books. In this paper, we introduce a dividend barrier strategy whereby dividend decisions are made only periodically, but still allow ruin to occur at any time (as soon as the surplus is exhausted). This is in contrast to Albrecher et al. (2011a), who introduced periodic dividend payments in the Cramér–Lundberg surplus model, albeit with periodic ruin opportunities as well.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 52 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/505554
Dual model; Barrier strategy; Erlangization; Dividends; Ruin;
Find related papers by JEL classification:
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gerber, Hans U. & Smith, Nathaniel, 2008. "Optimal dividends with incomplete information in the dual model," Insurance: Mathematics and Economics, Elsevier, vol. 43(2), pages 227-233, October.
- Albrecher, Hansjörg & Badescu, Andrei & Landriault, David, 2008. "On the dual risk model with tax payments," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1086-1094, June.
- Avanzi, Benjamin & U. Gerber, Hans & S.W. Shiu, Elias, 2007. "Optimal dividends in the dual model," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 111-123, July.
- Mazza, Christian & Rulliere, Didier, 2004. "A link between wave governed random motions and ruin processes," Insurance: Mathematics and Economics, Elsevier, vol. 35(2), pages 205-222, October.
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