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On non-trivial barrier solutions of the dividend problem for a diffusion under constant and proportional transaction costs

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  • Bai, Lihua
  • Paulsen, Jostein
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    Abstract

    In Bai and Paulsen [L. Bai, J. Paulsen, Optimal dividend policies with transaction costs for a class of diffusion processes, SIAM J. Control Optim. 48 (2010) 4987–5008] the optimal dividend problem under transaction costs was analyzed for a rather general class of diffusion processes. It was divided into several subclasses, and for the majority of subclasses the optimal policy is a simple barrier policy; whenever the process hits an upper barrier ū∗, reduce it to ū∗−ξ through a dividend payment. After transaction costs, the shareholder receives kξ−K.

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    Bibliographic Info

    Article provided by Elsevier in its journal Stochastic Processes and their Applications.

    Volume (Year): 122 (2012)
    Issue (Month): 12 ()
    Pages: 4005-4027

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    Handle: RePEc:eee:spapps:v:122:y:2012:i:12:p:4005-4027

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    Related research

    Keywords: Optimal dividends; Diffusion process; Quasi-variational inequalities; Lump sum dividend barrier strategy; Two-level lump sum dividend barrier strategy;

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    1. Lihua Bai & Martin Hunting & Jostein Paulsen, 2012. "Optimal dividend policies for a class of growth-restricted diffusion processes under transaction costs and solvency constraints," Finance and Stochastics, Springer, vol. 16(3), pages 477-511, July.
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    Cited by:
    1. Martin Hunting & Jostein Paulsen, 2013. "Optimal dividend policies with transaction costs for a class of jump-diffusion processes," Finance and Stochastics, Springer, vol. 17(1), pages 73-106, January.

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