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Optimal dividend problem with a terminal value for spectrally positive Lévy processes

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  • Yin, Chuancun
  • Wen, Yuzhen

Abstract

In this paper we consider a modified version of the classical optimal dividend problem taking into account both expected dividends and the time value of ruin. We assume that the risk process is modeled by a general spectrally positive Lévy process before dividends are deducted. Using the fluctuation theory of spectrally positive Lévy processes we give an explicit expression of the value function of a barrier strategy. Subsequently we show that a barrier strategy is the optimal strategy among all admissible ones. Our work is motivated by the recent work of Bayraktar, Kyprianou and Yamazaki (2013a).

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  • Yin, Chuancun & Wen, Yuzhen, 2013. "Optimal dividend problem with a terminal value for spectrally positive Lévy processes," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 769-773.
    • Handle: RePEc:eee:insuma:v:53:y:2013:i:3:p:769-773
    DOI: 10.1016/j.insmatheco.2013.09.019
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    References listed on IDEAS

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    7. Erhan Bayraktar & Masahiko Egami, 2008. "Optimizing venture capital investments in a jump diffusion model," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 67(1), pages 21-42, February.
    8. Loeffen, Ronnie L. & Renaud, Jean-François, 2010. "De Finetti's optimal dividends problem with an affine penalty function at ruin," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 98-108, February.
    9. Yin, Chuancun & Wen, Yuzhen, 2013. "An extension of Paulsen–Gjessing’s risk model with stochastic return on investments," Insurance: Mathematics and Economics, Elsevier, vol. 52(3), pages 469-476.
    10. Pablo Azcue & Nora Muler, 2005. "Optimal Reinsurance And Dividend Distribution Policies In The Cramér‐Lundberg Model," Mathematical Finance, Wiley Blackwell, vol. 15(2), pages 261-308, April.
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    14. Chuancun Yin & Yuzhen Wen, 2013. "An extension of Paulsen-Gjessing's risk model with stochastic return on investments," Papers 1302.6757, arXiv.org.
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    Cited by:

    1. Zhang, Jiannan & Chen, Ping & Jin, Zhuo & Li, Shuanming, 2021. "On a class of non-zero-sum stochastic differential dividend games with regime switching," Applied Mathematics and Computation, Elsevier, vol. 397(C).
    2. Aili Zhang & Ping Chen & Shuanming Li & Wenyuan Wang, 2020. "Risk Modelling on Liquidations with L\'{e}vy Processes," Papers 2007.01426, arXiv.org.
    3. Wenyuan Wang & Yuebao Wang & Ping Chen & Xueyuan Wu, 2022. "Dividend and Capital Injection Optimization with Transaction Cost for Lévy Risk Processes," Journal of Optimization Theory and Applications, Springer, vol. 194(3), pages 924-965, September.
    4. Pérez, José-Luis & Yamazaki, Kazutoshi, 2017. "On the optimality of periodic barrier strategies for a spectrally positive Lévy process," Insurance: Mathematics and Economics, Elsevier, vol. 77(C), pages 1-13.
    5. Hernández, Camilo & Junca, Mauricio & Moreno-Franco, Harold, 2018. "A time of ruin constrained optimal dividend problem for spectrally one-sided Lévy processes," Insurance: Mathematics and Economics, Elsevier, vol. 79(C), pages 57-68.
    6. Kazutoshi Yamazaki, 2017. "Inventory Control for Spectrally Positive Lévy Demand Processes," Mathematics of Operations Research, INFORMS, vol. 42(1), pages 212-237, January.
    7. Boxma, Onno & Frostig, Esther, 2018. "The dual risk model with dividends taken at arrival," Insurance: Mathematics and Economics, Elsevier, vol. 83(C), pages 83-92.
    8. Zhang, Aili & Chen, Ping & Li, Shuanming & Wang, Wenyuan, 2022. "Risk modelling on liquidations with Lévy processes," Applied Mathematics and Computation, Elsevier, vol. 412(C).
    9. Junxia Ma & Qiuling Fei & Fan Guo & Weili Xiong, 2019. "Variational Bayesian Iterative Estimation Algorithm for Linear Difference Equation Systems," Mathematics, MDPI, vol. 7(12), pages 1-16, November.
    10. Yongxia Zhao & Rongming Wang & Dingjun Yao & Ping Chen, 2015. "Optimal Dividends and Capital Injections in the Dual Model with a Random Time Horizon," Journal of Optimization Theory and Applications, Springer, vol. 167(1), pages 272-295, October.
    11. Zhao, Yongxia & Chen, Ping & Yang, Hailiang, 2017. "Optimal periodic dividend and capital injection problem for spectrally positive Lévy processes," Insurance: Mathematics and Economics, Elsevier, vol. 74(C), pages 135-146.
    12. Zhang, Nan & Jin, Zhuo & Qian, Linyi & Fan, Kun, 2019. "Stochastic differential reinsurance games with capital injections," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 7-18.
    13. Hao Ma & Jian Pan & Lei Lv & Guanghui Xu & Feng Ding & Ahmed Alsaedi & Tasawar Hayat, 2019. "Recursive Algorithms for Multivariable Output-Error-Like ARMA Systems," Mathematics, MDPI, vol. 7(6), pages 1-18, June.
    14. Chongrui Zhu, 2021. "Optimality of threshold strategies for spectrally negative Levy processes and a positive terminal value at creeping ruin," Papers 2107.06841, arXiv.org, revised Jan 2023.
    15. Camilo Hernandez & Mauricio Junca & Harold Moreno-Franco, 2016. "A time of ruin constrained optimal dividend problem for spectrally one-sided L\'evy processes," Papers 1608.02550, arXiv.org, revised May 2017.
    16. Jos'e-Luis P'erez & Kazutoshi Yamazaki, 2016. "Hybrid continuous and periodic barrier strategies in the dual model: optimality and fluctuation identities," Papers 1612.02444, arXiv.org, revised Jan 2018.
    17. Lijuan Wan & Ximei Liu & Feng Ding & Chunping Chen, 2019. "Decomposition Least-Squares-Based Iterative Identification Algorithms for Multivariable Equation-Error Autoregressive Moving Average Systems," Mathematics, MDPI, vol. 7(7), pages 1-20, July.
    18. Feng Ding & Jian Pan & Ahmed Alsaedi & Tasawar Hayat, 2019. "Gradient-Based Iterative Parameter Estimation Algorithms for Dynamical Systems from Observation Data," Mathematics, MDPI, vol. 7(5), pages 1-15, May.
    19. Benjamin Avanzi & Debbie Kusch Falden & Mogens Steffensen, 2022. "Stable Dividends under Linear-Quadratic Optimization," Papers 2210.03494, arXiv.org.
    20. Florin Avram & Dan Goreac & Juan Li & Xiaochi Wu, 2021. "Equity Cost Induced Dichotomy for Optimal Dividends with Capital Injections in the Cramér-Lundberg Model," Mathematics, MDPI, vol. 9(9), pages 1-27, April.
    21. Benjamin Avanzi & Jos'e-Luis P'erez & Bernard Wong & Kazutoshi Yamazaki, 2016. "On optimal joint reflective and refractive dividend strategies in spectrally positive L\'evy models," Papers 1607.01902, arXiv.org, revised Nov 2016.
    22. Bohan Li & Junyi Guo, 2021. "Optimal Investment and Reinsurance Under the Gamma Process," Methodology and Computing in Applied Probability, Springer, vol. 23(3), pages 893-923, September.
    23. Chuancun Yin & Kam Chuen Yuen, 2014. "Optimal dividend problems for a jump-diffusion model with capital injections and proportional transaction costs," Papers 1409.0407, arXiv.org.
    24. Avanzi, Benjamin & Pérez, José-Luis & Wong, Bernard & Yamazaki, Kazutoshi, 2017. "On optimal joint reflective and refractive dividend strategies in spectrally positive Lévy models," Insurance: Mathematics and Economics, Elsevier, vol. 72(C), pages 148-162.
    25. Piotr Jaworski & Kamil Liberadzki & Marcin Liberadzki, 2021. "On Write-Down/ Write-Up Loss Absorbing Instruments," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 1204-1219.

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