Optimal periodic dividend and capital injection problem for spectrally positive Lévy processes

Yongxia Zhao, Ping Chen and Hailiang Yang

Insurance: Mathematics and Economics, 2017, vol. 74, issue C, 135-146

Abstract: In this paper, we investigate an optimal periodic dividend and capital injection problem for spectrally positive Lévy processes. We assume that the periodic dividend strategy has exponential inter-dividend-decision times and continuous monitoring of solvency. Both proportional and fixed transaction costs from capital injection are considered. The objective is to maximize the total value of the expected discounted dividends and the penalized discounted capital injections until the time of ruin. By the fluctuation theory of Lévy processes in Albrecher et al. (2016), the optimal periodic dividend and capital injection strategies are derived. We also find that the optimal return function can be expressed in terms of the scale functions of Lévy processes. Finally, numerical examples are studied to illustrate our results.

Keywords: Periodic dividend; Capital injection; Lévy process; Stochastic control; Scale function (search for similar items in EconPapers)
JEL-codes: C44 C61 G32 G35 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:74:y:2017:i:c:p:135-146

DOI: 10.1016/j.insmatheco.2017.03.006

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