Optimal dividends and capital injection: A general Lévy model with extensions to regime-switching models

Dante Mata López, Kei Noba, José-Luis Pérez and Kazutoshi Yamazaki

Insurance: Mathematics and Economics, 2024, vol. 119, issue C, 210-225

Abstract: This paper studies a general Lévy process model of the bail-out optimal dividend problem with an exponential time horizon, and further extends it to the regime-switching model. We first show the optimality of a double barrier strategy in the single-regime setting with a concave terminal payoff function. This is then applied to show the optimality of a Markov-modulated double barrier strategy in the regime-switching model via contraction mapping arguments. We solve these for a general Lévy model with both positive and negative jumps, greatly generalizing the existing results on spectrally one-sided models.

Keywords: Optimal dividends; Lévy processes; Singular control; Regime switching (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:119:y:2024:i:c:p:210-225

DOI: 10.1016/j.insmatheco.2024.08.007

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