Optimal Dividend Control in Presence of Downside Risk
AbstractWe analyze the determination of a value maximizing dividend policy for a broad class of cash flow processes modelled as spectrally negative jump diffusions. We extend previous results based on continuous diffusion models and characterize the value of the optimal dividend policy explicitly. Utilizing this result, we also characterize explicitly the values as well as the optimal dividend thresholds for a class of associated optimal stopping and sequential impulse control problems. Our results indicate that both the value as well as the marginal value of the optimal policy are increasing functions of policy flexibility in the discontinuous setting as well.
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Bibliographic InfoPaper provided by Aboa Centre for Economics in its series Discussion Papers with number 14.
Date of creation: Mar 2007
Date of revision:
dividend optimization; downside risk; impulse control; jump diffusion; optimal stopping; singular stochastic control;
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
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