Dividend optimization for regime-switching general diffusions
AbstractWe consider the optimal dividend distribution problem of a financial corporation whose surplus is modeled by a general diffusion process with both the drift and diffusion coefficients depending on the external economic regime as well as the surplus itself through general functions. The aim is to find a dividend payout scheme that maximizes the present value of the total dividends until ruin. We show that, depending on the configuration of the model parameters, there are two exclusive scenarios: (i)the optimal strategy uniquely exists and corresponds to paying out all surpluses in excess of a critical level (barrier) dependent on the economic regime and paying nothing when the surplus is below the critical level;(ii)there are no optimal strategies.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 53 (2013)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/505554
Dividend; Dynamic programming principle; General diffusion; Optimization; Regime-switching; IM13; IE20; IB63;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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