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On the Dividend Strategies with Non-Exponential Discounting

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  • Qian Zhao
  • Jiaqin Wei
  • Rongming Wang

Abstract

In this paper, we study the dividend strategies for a shareholder with non-constant discount rate in a diffusion risk model. We assume that the dividends can only be paid at a bounded rate and restrict ourselves to the Markov strategies. This is a time inconsistent control problem. The extended HJB equation is given and the verification theorem is proved for a general discount function. Considering the pseudo-exponential discount functions (Type I and Type II), we get the equilibrium dividend strategies and the equilibrium value functions by solving the extended HJB equations.

Suggested Citation

  • Qian Zhao & Jiaqin Wei & Rongming Wang, 2013. "On the Dividend Strategies with Non-Exponential Discounting," Papers 1304.7878, arXiv.org, revised Nov 2013.
    • Handle: RePEc:arx:papers:1304.7878
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    References listed on IDEAS

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    7. Bjarne Hø Jgaard & Michael Taksar, 1999. "Controlling Risk Exposure and Dividends Payout Schemes:Insurance Company Example," Mathematical Finance, Wiley Blackwell, vol. 9(2), pages 153-182, April.
    8. Hans Gerber & Elias Shiu, 2006. "On Optimal Dividend Strategies In The Compound Poisson Model," North American Actuarial Journal, Taylor & Francis Journals, vol. 10(2), pages 76-93.
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