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Optimal Hybrid Dividend Strategy Under The Markovian Regime-Switching Economy

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  • Xiaoxiao Zheng
  • Xin Zhang

Abstract

In this paper, we consider the optimal dividend problem for a company. We describe the surplus process of the company by a diffusion model with regime switching. The aim of the company is to choose a dividend policy to maximize the expected total discounted payments until ruin. In this article, we consider a hybrid dividend strategy, that is, the company is allowed to conduct continuous dividend strategy as well as impulsive dividend strategy. In addition, we consider the change of economy, which is characterized by a markovian regime-switching, and under the setting of two regimes, we solve the problem and obtain the analytical solution for the value function.

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  • Xiaoxiao Zheng & Xin Zhang, 2014. "Optimal Hybrid Dividend Strategy Under The Markovian Regime-Switching Economy," Papers 1406.7606, arXiv.org.
    • Handle: RePEc:arx:papers:1406.7606
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    References listed on IDEAS

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    1. Abel Cadenillas & Tahir Choulli & Michael Taksar & Lei Zhang, 2006. "Classical And Impulse Stochastic Control For The Optimization Of The Dividend And Risk Policies Of An Insurance Firm," Mathematical Finance, Wiley Blackwell, vol. 16(1), pages 181-202, January.
    2. Jiaqin Wei & Hailiang Yang & Rongming Wang, 2010. "Classical and Impulse Control for the Optimization of Dividend and Proportional Reinsurance Policies with Regime Switching," Journal of Optimization Theory and Applications, Springer, vol. 147(2), pages 358-377, November.
    3. Sotomayor, Luz R. & Cadenillas, Abel, 2011. "Classical and singular stochastic control for the optimal dividend policy when there is regime switching," Insurance: Mathematics and Economics, Elsevier, vol. 48(3), pages 344-354, May.
    4. Lin, X.Sheldon & Pavlova, Kristina P., 2006. "The compound Poisson risk model with a threshold dividend strategy," Insurance: Mathematics and Economics, Elsevier, vol. 38(1), pages 57-80, February.
    5. Pablo Azcue & Nora Muler, 2005. "Optimal Reinsurance And Dividend Distribution Policies In The Cramér‐Lundberg Model," Mathematical Finance, Wiley Blackwell, vol. 15(2), pages 261-308, April.
    6. Asmussen, Soren & Taksar, Michael, 1997. "Controlled diffusion models for optimal dividend pay-out," Insurance: Mathematics and Economics, Elsevier, vol. 20(1), pages 1-15, June.
    7. Loeffen, R.L., 2009. "An optimal dividends problem with transaction costs for spectrally negative Lévy processes," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 41-48, August.
    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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