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De Finetti’s Control Problem with Parisian Ruin for Spectrally Negative Lévy Processes

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  • Jean-François Renaud

    (Département de mathématiques, Université du Québec à Montréal (UQAM), Montréal, QC H2X 3Y7, Canada)

Abstract

We consider de Finetti’s stochastic control problem when the (controlled) process is allowed to spend time under the critical level. More precisely, we consider a generalized version of this control problem in a spectrally negative Lévy model with exponential Parisian ruin. We show that, under mild assumptions on the Lévy measure, an optimal strategy is formed by a barrier strategy and that this optimal barrier level is always less than the optimal barrier level when classical ruin is implemented. In addition, we give necessary and sufficient conditions for the barrier strategy at level zero to be optimal.

Suggested Citation

  • Jean-François Renaud, 2019. "De Finetti’s Control Problem with Parisian Ruin for Spectrally Negative Lévy Processes," Risks, MDPI, vol. 7(3), pages 1-11, July.
    • Handle: RePEc:gam:jrisks:v:7:y:2019:i:3:p:73-:d:245263
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    References listed on IDEAS

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    6. F. Avram & Z. Palmowski & M. R. Pistorius, 2011. "On Gerber-Shiu functions and optimal dividend distribution for a L\'{e}vy risk process in the presence of a penalty function," Papers 1110.4965, arXiv.org, revised Jun 2015.
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    10. 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.
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    Cited by:

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