On the Optimal Dividend Strategy in a Regime-Switching Diffusion Model

Wei, Jiaqin; Wang, Rongming; Yang, Hailiang

doi:10.1239/aap/1346955269

Cited by 18 publications

(4 citation statements)

References 10 publications

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“…In the case of exponential (Erlang(1)) inter-dividend-decision times, Albrecher et al (2011b) study the periodic barrier strategies by deriving the expected present value of dividends and the associated optimal periodic barrier. The optimality of the periodic barrier strategies are studied by Wei et al (2012) in the Brownian risk model with regime-switching and Avanzi et al (2014) in the dual model with diffusion.…”

Section: Motivation and Literature Reviewmentioning

confidence: 99%

On the Interface Between Optimal Periodic and Continuous Dividend Strategies in the Presence of Transaction Costs

Avanzi

Wong

2016

ASTIN Bull.

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In the classical optimal dividends problem, dividend decisions are allowed to be made at any point in time -according to a continuous strategy. Depending on the surplus process that is considered and whether dividend payouts are bounded or not, optimal strategies are generally of a band, barrier or threshold type. In reality, while surpluses change continuously, dividends are generally paid on a periodic basis. Because of this, the actuarial literature has recently considered strategies where dividends are only allowed to be distributed at (random) discrete times -according to a periodic strategy.In this paper, we focus on the Brownian risk model. In this context, the optimal continuous and periodic strategies have previously been shown (independently of one another) to be of barrier type. For the first time, we consider a model where both strategies are used. In such a hybrid strategy, decisions are allowed to be made either at any time (continuously), or periodically at a lower cost. This proves optimal in some cases. We also determine under which combination of parameters a pure continuous, pure periodic or hybrid (including both continuous and periodic dividend payments) barrier strategy is optimal. Interestingly, the hybrid strategy lies in-between periodic and continuous strategies, which provides some interesting insights. Results are illustrated.

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Section: Motivation and Literature Reviewmentioning

confidence: 99%

On the Interface Between Optimal Periodic and Continuous Dividend Strategies in the Presence of Transaction Costs

Avanzi

Wong

2016

ASTIN Bull.

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“…While dividends can be paid and ruin can be observed, Albrecher, Cheung, and Thonhauser (2011) studied periodic dividend barrier strategies by that technique. Wei et al (2012) studied the optimality of periodic barrier strategy under switched CONTACT Fu Liqun a1412514503@sina.com Brownian risk model. In addition, the expected present value of dividends at ruin time under a periodic barrier strategy in the dual model with diffusion and Erlang(n) inter-decision times is studied by Avanzi, Cheung, Wong, and Woo (2013).…”

Section: Introductionmentioning

confidence: 99%

Optimal dividends under Erlang(2) inter-dividend decision times with nonlinear surplus

Chuan-yu

Huan

2019

Systems Science & Control Engineering

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In the classic dividend surplus model, initial surplus are generally fixed and premiums or incomes increased linearly. In our research, we consider that the initial surplus and income in the Erlang(2) dividend model will also change over time. This model contains both the continuous-time and the discrete-time risk model as a limit and represents a certain type of bridge between them which still enables the explicit calculation of moments of total discounted dividend payments until ruin. In this paper, we adopt Statistical methods to convert the differential equations with variable coefficients to ordinary differential equation and further study the optimal periodic barrier strategies when the initial surplus is dynamic and the income is nonlinear under the condition of the inter-dividend decision times follow Erlang(2) distribution.

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“…Such an application was developed by Zhu and Chen [25]. Different dividend optimization problems, but still in a regime-switching setting, have been recently treated by Sotomayor and Cadenillas [20], Wei et al [21], [22], [23], and Zhu [24].…”

Section: Introductionmentioning

confidence: 99%

Optimal Dividend Policy when Cash Reserves Follow a Jump-Diffusion Process Under Markov-Regime Switching

Jiang¹

2015

J. Appl. Probab.

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In this paper we study the optimal dividend payments for a company of limited liability whose cash reserves in the absence of dividends follow a Markov-modulated jumpdiffusion process with positive drifts and negative exponential jumps, where parameters and discount rates are modulated by a finite-state irreducible Markov chain. The main aim is to maximize the expected cumulative discounted dividend payments until bankruptcy time when cash reserves are nonpositive for the first time. We extend the results of Jiang and Pistorius [15] to our setup by proving that it is optimal to adopt a modulated barrier strategy at certain positive regime-dependent levels and that the value function can be explicitly characterized as the fixed point of a contraction.

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On the Optimal Dividend Strategy in a Regime-Switching Diffusion Model

Cited by 18 publications

References 10 publications

On the Interface Between Optimal Periodic and Continuous Dividend Strategies in the Presence of Transaction Costs

On the Interface Between Optimal Periodic and Continuous Dividend Strategies in the Presence of Transaction Costs

Optimal dividends under Erlang(2) inter-dividend decision times with nonlinear surplus

Optimal Dividend Policy when Cash Reserves Follow a Jump-Diffusion Process Under Markov-Regime Switching

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