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On the optimality of joint periodic and extraordinary dividend strategies

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  • Avanzi, Benjamin
  • Lau, Hayden
  • Wong, Bernard

Abstract

In this paper, we model the cash surplus (or equity) of a risky business with a Brownian motion (with a drift). Owners can take cash out of the surplus in the form of “dividends”, subject to transaction costs. However, if the surplus hits 0 then ruin occurs and the business cannot operate any more.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:ejores:v:295:y:2021:i:3:p:1189-1210
    DOI: 10.1016/j.ejor.2021.04.033
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    1. Diasparra, M. & Romera, R., 2010. "Inequalities for the ruin probability in a controlled discrete-time risk process," European Journal of Operational Research, Elsevier, vol. 204(3), pages 496-504, August.
    2. 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.
    3. Avanzi, Benjamin & Tu, Vincent & Wong, Bernard, 2016. "On The Interface Between Optimal Periodic And Continuous Dividend Strategies In The Presence Of Transaction Costs," ASTIN Bulletin, Cambridge University Press, vol. 46(3), pages 709-746, September.
    4. 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.
    5. 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.
    6. 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.
    7. Kei Noba & Jos'e-Luis P'erez & Kazutoshi Yamazaki & Kouji Yano, 2017. "On optimal periodic dividend strategies for L\'evy risk processes," Papers 1708.01678, arXiv.org, revised Feb 2018.
    8. 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.
    9. 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.
    10. Benjamin Avanzi & Vincent Tu & Bernard Wong, 2016. "A Note on Realistic Dividends in Actuarial Surplus Models," Risks, MDPI, vol. 4(4), pages 1-9, October.
    11. José-Luis Pérez & Kazutoshi Yamazaki, 2018. "Mixed Periodic-Classical Barrier Strategies for Lévy Risk Processes," Risks, MDPI, vol. 6(2), pages 1-39, April.
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    13. 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.
    14. Cheung, Eric C.K. & Wong, Jeff T.Y., 2017. "On the dual risk model with Parisian implementation delays in dividend payments," European Journal of Operational Research, Elsevier, vol. 257(1), pages 159-173.
    15. 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.
    16. Erhan Bayraktar & Masahiko Egami, 2010. "A unified treatment of dividend payment problems under fixed cost and implementation delays," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(2), pages 325-351, April.
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    19. 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.
    20. 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.
    21. Bäuerle, Nicole & Jaśkiewicz, Anna, 2015. "Risk-sensitive dividend problems," European Journal of Operational Research, Elsevier, vol. 242(1), pages 161-171.
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    Cited by:

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