Optimal Dividend Control in Presence of Downside Risk

Luis H.R. Alvarez E. () and Teppo A. Rakkolainen ()
Additional contact information
Luis H.R. Alvarez E.: Department of Economics, Turku School of Economics
Teppo A. Rakkolainen: Department of Economics, Turku School of Economics

No 14, Discussion Papers from Aboa Centre for Economics

Abstract: We analyze the determination of a value maximizing dividend policy for a broad class of cash flow processes modelled as spectrally negative jump diffusions. We extend previous results based on continuous diffusion models and characterize the value of the optimal dividend policy explicitly. Utilizing this result, we also characterize explicitly the values as well as the optimal dividend thresholds for a class of associated optimal stopping and sequential impulse control problems. Our results indicate that both the value as well as the marginal value of the optimal policy are increasing functions of policy flexibility in the discontinuous setting as well.

Keywords: dividend optimization; downside risk; impulse control; jump diffusion; optimal stopping; singular stochastic control (search for similar items in EconPapers)
JEL-codes: C61 G35 (search for similar items in EconPapers)
Date: 2007-03
View list of references

Downloads: (external link)
http://www.ace-economics.fi/kuvat/ACE14%20valmis.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:tkk:dpaper:dp14

Access Statistics for this paper

More papers in Discussion Papers from Aboa Centre for Economics
Contact information at EDIRC.
Series data maintained by Aleksandra Maslowska ().