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De Finetti's optimal dividends problem with an affine penalty function at ruin

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  • Loeffen, Ronnie L.
  • Renaud, Jean-François

Abstract

In a Lévy insurance risk model, under the assumption that the tail of the Lévy measure is log-convex, we show that either a horizontal barrier strategy or the take-the-money-and-run strategy maximizes, among all admissible strategies, the dividend payments subject to an affine penalty function at ruin. As a key step for the proof, we prove that, under the aforementioned condition on the jump measure, the scale function of the spectrally negative Lévy process has a log-convex derivative.

Suggested Citation

  • Loeffen, Ronnie L. & Renaud, Jean-François, 2010. "De Finetti's optimal dividends problem with an affine penalty function at ruin," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 98-108, February.
  • Handle: RePEc:eee:insuma:v:46:y:2010:i:1:p:98-108
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    References listed on IDEAS

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    1. Dickson, David C.M. & Waters, Howard R., 2004. "Some Optimal Dividends Problems," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 34(01), pages 49-74, May.
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    3. An, Mark Yuying, 1998. "Logconcavity versus Logconvexity: A Complete Characterization," Journal of Economic Theory, Elsevier, vol. 80(2), pages 350-369, June.
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    5. Kulenko, Natalie & Schmidli, Hanspeter, 2008. "Optimal dividend strategies in a Cramér-Lundberg model with capital injections," Insurance: Mathematics and Economics, Elsevier, pages 270-278.
    6. Loeffen, R.L., 2009. "An optimal dividends problem with transaction costs for spectrally negative Lévy processes," Insurance: Mathematics and Economics, Elsevier, pages 41-48.
    7. Gerber, Hans U. & Shiu, Elias S.W. & Smith, Nathaniel, 2006. "Maximizing Dividends without Bankruptcy," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 36(01), pages 5-23, May.
    8. Thonhauser, Stefan & Albrecher, Hansjorg, 2007. "Dividend maximization under consideration of the time value of ruin," Insurance: Mathematics and Economics, Elsevier, pages 163-184.
    9. Gerber, Hans U. & Lin, X. Sheldon & Yang, Hailiang, 2006. "A Note on the Dividends-Penalty Identity and the Optimal Dividend Barrier," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 36(02), pages 489-503, November.
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    Citations

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    Cited by:

    1. Masahiko Egami & Kazutoshi Yamazaki, 2010. "Solving Optimal Dividend Problems via Phase-Type Fitting Approximation of Scale Functions," Discussion papers e-10-011, Graduate School of Economics Project Center, Kyoto University.
    2. 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.
    3. Bo, Lijun & Song, Renming & Tang, Dan & Wang, Yongjin & Yang, Xuewei, 2012. "Lévy risk model with two-sided jumps and a barrier dividend strategy," Insurance: Mathematics and Economics, Elsevier, pages 280-291.
    4. Liang, Zhibin & Young, Virginia R., 2012. "Dividends and reinsurance under a penalty for ruin," Insurance: Mathematics and Economics, Elsevier, pages 437-445.
    5. Gajek, Lesław & Kuciński, Łukasz, 2017. "Complete discounted cash flow valuation," Insurance: Mathematics and Economics, Elsevier, pages 1-19.
    6. Jiyang Tan & Chun Li & Ziqiang Li & Xiangqun Yang & Bicheng Zhang, 2015. "Optimal dividend strategies in a delayed claim risk model with dividends discounted by stochastic interest rates," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 82(1), pages 61-83, August.
    7. Camilo Hernandez & Mauricio Junca & Harold Moreno-Franco, 2016. "A time of ruin constrained optimal dividend problem for spectrally one-sided L\'evy processes," Papers 1608.02550, arXiv.org, revised May 2017.
    8. Yin, Chuancun & Wen, Yuzhen, 2013. "Optimal dividend problem with a terminal value for spectrally positive Lévy processes," Insurance: Mathematics and Economics, Elsevier, pages 769-773.
    9. Ewa Marciniak & Zbigniew Palmowski, 2016. "On the Optimal Dividend Problem in the Dual Model with Surplus-Dependent Premiums," Papers 1605.04584, arXiv.org.
    10. Yao, Dingjun & Yang, Hailiang & Wang, Rongming, 2014. "Optimal risk and dividend control problem with fixed costs and salvage value: Variance premium principle," Economic Modelling, Elsevier, vol. 37(C), pages 53-64.
    11. Hansjoerg Albrecher & Pablo Azcue & Nora Muler, 2015. "Optimal Dividend Strategies for Two Collaborating Insurance Companies," Papers 1505.03980, arXiv.org.
    12. Pablo Azcue & Nora Muler & Zbigniew Palmowski, 2016. "Optimal dividend payments for a two-dimensional insurance risk process," Papers 1603.07019, arXiv.org, revised Jul 2016.
    13. Landriault, David & Renaud, Jean-François & Zhou, Xiaowen, 2011. "Occupation times of spectrally negative Lévy processes with applications," Stochastic Processes and their Applications, Elsevier, vol. 121(11), pages 2629-2641, November.

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