IDEAS home Printed from https://ideas.repec.org/a/eee/insuma/v55y2014icp210-224.html
   My bibliography  Save this article

On optimal periodic dividend strategies in the dual model with diffusion

Author

Listed:
  • Avanzi, Benjamin
  • Tu, Vincent
  • Wong, Bernard

Abstract

The dual model with diffusion is appropriate for companies with continuous expenses that are offset by stochastic and irregular gains. Examples include research-based or commission-based companies. In this context, Bayraktar et al. (2013a) show that a dividend barrier strategy is optimal when dividend decisions are made continuously. In practice, however, companies that are capable of issuing dividends make dividend decisions on a periodic (rather than continuous) basis.

Suggested Citation

  • Avanzi, Benjamin & Tu, Vincent & Wong, Bernard, 2014. "On optimal periodic dividend strategies in the dual model with diffusion," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 210-224.
    • Handle: RePEc:eee:insuma:v:55:y:2014:i:c:p:210-224
    DOI: 10.1016/j.insmatheco.2014.01.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167668714000092
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.insmatheco.2014.01.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Avanzi, Benjamin & Cheung, Eric C.K. & Wong, Bernard & Woo, Jae-Kyung, 2013. "On a periodic dividend barrier strategy in the dual model with continuous monitoring of solvency," Insurance: Mathematics and Economics, Elsevier, vol. 52(1), pages 98-113.
    2. Avanzi, Benjamin & Shen, Jonathan & Wong, Bernard, 2011. "Optimal Dividends and Capital Injections in the Dual Model with Diffusion," ASTIN Bulletin, Cambridge University Press, vol. 41(2), pages 611-644, November.
    3. Bayraktar, Erhan & Kyprianou, Andreas E. & Yamazaki, Kazutoshi, 2014. "Optimal dividends in the dual model under transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 133-143.
    4. Avanzi, Benjamin & Gerber, Hans U., 2008. "Optimal Dividends in the Dual Model with Diffusion," ASTIN Bulletin, Cambridge University Press, vol. 38(2), pages 653-667, November.
    5. Benjamin Avanzi, 2009. "Strategies for Dividend Distribution: A Review," North American Actuarial Journal, Taylor & Francis Journals, vol. 13(2), pages 217-251.
    6. Bayraktar, Erhan & Kyprianou, Andreas E. & Yamazaki, Kazutoshi, 2013. "On Optimal Dividends In The Dual Model," ASTIN Bulletin, Cambridge University Press, vol. 43(3), pages 359-372, September.
    7. Albrecher Hansjörg & Bäuerle Nicole & Thonhauser Stefan, 2011. "Optimal dividend-payout in random discrete time," Statistics & Risk Modeling, De Gruyter, vol. 28(3), pages 251-276, September.
    8. Albrecher, Hansjörg & Cheung, Eric C.K. & Thonhauser, Stefan, 2011. "Randomized Observation Periods for the Compound Poisson Risk Model: Dividends," ASTIN Bulletin, Cambridge University Press, vol. 41(2), pages 645-672, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel Hern'andez-Hern'andez & Harold A. Moreno-Franco & Jos'e Luis P'erez, 2017. "Periodic strategies in optimal execution with multiplicative price impact," Papers 1705.00284, arXiv.org, revised May 2018.
    2. Benjamin Avanzi & Hayden Lau & Bernard Wong, 2020. "On the optimality of joint periodic and extraordinary dividend strategies," Papers 2006.00717, arXiv.org, revised Dec 2020.
    3. José-Luis Pérez & Kazutoshi Yamazaki, 2018. "Mixed Periodic-Classical Barrier Strategies for Lévy Risk Processes," Risks, MDPI, vol. 6(2), pages 1-39, April.
    4. Avanzi, Benjamin & Lau, Hayden & Wong, Bernard, 2021. "On the optimality of joint periodic and extraordinary dividend strategies," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1189-1210.
    5. Liu, Zhang & Chen, Ping & Hu, Yijun, 2020. "On the dual risk model with diffusion under a mixed dividend strategy," Applied Mathematics and Computation, Elsevier, vol. 376(C).
    6. Zbigniew Palmowski & José Luis Pérez & Kazutoshi Yamazaki, 2021. "Double continuation regions for American options under Poisson exercise opportunities," Mathematical Finance, Wiley Blackwell, vol. 31(2), pages 722-771, April.
    7. 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.
    8. Jos'e-Luis P'erez & Kazutoshi Yamazaki & Alain Bensoussan, 2018. "Optimal periodic replenishment policies for spectrally positive L\'evy demand processes," Papers 1806.09216, arXiv.org, revised Sep 2020.
    9. 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.
    10. Dong, Hua & Zhou, Xiaowen, 2019. "On a spectrally negative Lévy risk process with periodic dividends and capital injections," Statistics & Probability Letters, Elsevier, vol. 155(C), pages 1-1.
    11. 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.
    12. Zbigniew Palmowski & Jos'e Luis P'erez & Kazutoshi Yamazaki, 2020. "Double continuation regions for American options under Poisson exercise opportunities," Papers 2004.03330, arXiv.org.
    13. Avanzi, Benjamin & Tu, Vincent & Wong, Bernard, 2018. "Optimal dividends under Erlang(2) inter-dividend decision times," Insurance: Mathematics and Economics, Elsevier, vol. 79(C), pages 225-242.
    14. Noba, Kei & Pérez, José-Luis & Yamazaki, Kazutoshi & Yano, Kouji, 2018. "On optimal periodic dividend strategies for Lévy risk processes," Insurance: Mathematics and Economics, Elsevier, vol. 80(C), pages 29-44.
    15. Chen, Shumin & Wang, Xi & Deng, Yinglu & Zeng, Yan, 2016. "Optimal dividend-financing strategies in a dual risk model with time-inconsistent preferences," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 27-37.
    16. Zailei Cheng & Youngsoo Seol, 2018. "Gaussian Approximation of a Risk Model with Non-Stationary Hawkes Arrivals of Claims," Papers 1801.07595, arXiv.org, revised Aug 2019.
    17. Zbigniew Palmowski & José Luis Pérez & Budhi Arta Surya & Kazutoshi Yamazaki, 2020. "The Leland–Toft optimal capital structure model under Poisson observations," Finance and Stochastics, Springer, vol. 24(4), pages 1035-1082, October.
    18. Choi, Michael C.H. & Cheung, Eric C.K., 2014. "On the expected discounted dividends in the Cramér–Lundberg risk model with more frequent ruin monitoring than dividend decisions," Insurance: Mathematics and Economics, Elsevier, vol. 59(C), pages 121-132.
    19. Pérez, José-Luis & Yamazaki, Kazutoshi, 2018. "American options under periodic exercise opportunities," Statistics & Probability Letters, Elsevier, vol. 135(C), pages 92-101.
    20. Zbigniew Palmowski & Jos'e Luis P'erez & Budhi Arta Surya & Kazutoshi Yamazaki, 2019. "The Leland-Toft optimal capital structure model under Poisson observations," Papers 1904.03356, arXiv.org, revised Mar 2020.
    21. 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.
    22. Xixi Yang & Jiyang Tan & Hanjun Zhang & Ziqiang Li, 2017. "An Optimal Control Problem in a Risk Model with Stochastic Premiums and Periodic Dividend Payments," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(03), pages 1-18, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Chen, Shumin & Wang, Xi & Deng, Yinglu & Zeng, Yan, 2016. "Optimal dividend-financing strategies in a dual risk model with time-inconsistent preferences," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 27-37.
    3. 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.
    4. Avanzi, Benjamin & Lau, Hayden & Wong, Bernard, 2020. "Optimal periodic dividend strategies for spectrally positive Lévy risk processes with fixed transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 315-332.
    5. 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.
    6. Avanzi, Benjamin & Lau, Hayden & Wong, Bernard, 2021. "On the optimality of joint periodic and extraordinary dividend strategies," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1189-1210.
    7. 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.
    8. 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.
    9. Avanzi, Benjamin & Cheung, Eric C.K. & Wong, Bernard & Woo, Jae-Kyung, 2013. "On a periodic dividend barrier strategy in the dual model with continuous monitoring of solvency," Insurance: Mathematics and Economics, Elsevier, vol. 52(1), pages 98-113.
    10. Zhuo Jin & Zuo Quan Xu & Bin Zou, 2020. "A Perturbation Approach to Optimal Investment, Liability Ratio, and Dividend Strategies," Papers 2012.06703, arXiv.org, revised May 2021.
    11. 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.
    12. 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.
    13. Benjamin Avanzi & Hayden Lau & Bernard Wong, 2020. "On the optimality of joint periodic and extraordinary dividend strategies," Papers 2006.00717, arXiv.org, revised Dec 2020.
    14. 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.
    15. Bayraktar, Erhan & Kyprianou, Andreas E. & Yamazaki, Kazutoshi, 2014. "Optimal dividends in the dual model under transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 133-143.
    16. Avanzi, Benjamin & Tu, Vincent & Wong, Bernard, 2018. "Optimal dividends under Erlang(2) inter-dividend decision times," Insurance: Mathematics and Economics, Elsevier, vol. 79(C), pages 225-242.
    17. Benjamin Avanzi & Hayden Lau & Bernard Wong, 2020. "Optimal periodic dividend strategies for spectrally positive L\'evy risk processes with fixed transaction costs," Papers 2003.13275, arXiv.org, revised May 2020.
    18. Benjamin Avanzi & Hayden Lau & Bernard Wong, 2020. "Optimal periodic dividend strategies for spectrally negative L\'evy processes with fixed transaction costs," Papers 2004.01838, arXiv.org, revised Dec 2020.
    19. Liu, Zhang & Chen, Ping & Hu, Yijun, 2020. "On the dual risk model with diffusion under a mixed dividend strategy," Applied Mathematics and Computation, Elsevier, vol. 376(C).
    20. Choi, Michael C.H. & Cheung, Eric C.K., 2014. "On the expected discounted dividends in the Cramér–Lundberg risk model with more frequent ruin monitoring than dividend decisions," Insurance: Mathematics and Economics, Elsevier, vol. 59(C), pages 121-132.

    More about this item

    Keywords

    IM13; IE50; Optimal dividends; Dual model; Stochastic control; Periodic barrier;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:55:y:2014:i:c:p:210-224. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505554 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.