Optimal Bail-Out Dividend Problem with Transaction Cost and Capital Injection Constraint

Mauricio Junca, Harold Moreno-Franco () and José Luis Pérez
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Mauricio Junca: Department of Mathematics, Universidad de los Andes, Bogotá 11711, Colombia
José Luis Pérez: Department of Probability and Statistics, Centro de Investigación en Matemáticas A.C., Guanajuato 36000, Mexico

Risks, 2019, vol. 7, issue 1, 1-24

Abstract: We consider the optimal bail-out dividend problem with fixed transaction cost for a Lévy risk model with a constraint on the expected present value of injected capital. To solve this problem, we first consider the optimal bail-out dividend problem with transaction cost and capital injection and show the optimality of reflected ( c 1 , c 2 ) -policies. We then find the optimal Lagrange multiplier, by showing that in the dual Lagrangian problem the complementary slackness conditions are met. Finally, we present some numerical examples to support our results.

Keywords: dividend payment; optimal control; capital injection constraint; spectrally negative Lévy processes; reflected Lévy processes; scale functions (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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