On non-trivial barrier solutions of the dividend problem for a diffusion under constant and proportional transaction costs

Lihua Bai and Jostein Paulsen

Stochastic Processes and their Applications, 2012, vol. 122, issue 12, 4005-4027

Abstract: In Bai and Paulsen [L. Bai, J. Paulsen, Optimal dividend policies with transaction costs for a class of diffusion processes, SIAM J. Control Optim. 48 (2010) 4987–5008] the optimal dividend problem under transaction costs was analyzed for a rather general class of diffusion processes. It was divided into several subclasses, and for the majority of subclasses the optimal policy is a simple barrier policy; whenever the process hits an upper barrier ū∗, reduce it to ū∗−ξ through a dividend payment. After transaction costs, the shareholder receives kξ−K.

Keywords: Optimal dividends; Diffusion process; Quasi-variational inequalities; Lump sum dividend barrier strategy; Two-level lump sum dividend barrier strategy (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.spa.2012.08.009

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