A stochastic control problem with linearly bounded control rates in a Brownian model

Jean-Fran\c{c}ois Renaud and Clarence Simard

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Abstract: Aiming for more realistic optimal dividend policies, we consider a stochastic control problem with linearly bounded control rates using a performance function given by the expected present value of dividend payments made up to ruin. In a Brownian model, we prove the optimality of a member of a new family of control strategies called delayed linear control strategies, for which the controlled process is a refracted diffusion process. For some parameters specifications, we retrieve the strategy initially proposed by Avanzi & Wong (2012) to regularize dividend payments, which is more consistent with actual practice.

Date: 2020-07
New Economics Papers: this item is included in nep-ore
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