Dividend optimization for general diffusions with restricted dividend payment rates

Jinxia Zhu

Scandinavian Actuarial Journal, 2015, vol. 2015, issue 7, 592-615

Abstract: The dividend optimization problem is studied for a surplus process modeled by a general diffusion where both the drift and diffusion coefficients are functions of the surplus. The dividend payment rate is restricted. The objective is to find an optimal strategy that maximizes the total expected discounted dividends until ruin. It is shown that an optimal strategy is to pay no dividends when the surplus is below a threshold b∗$ b^* $ and to pay out dividends at the maximal possible rate when the surplus reaches or is above the threshold b∗$ b^* $. We also give a result on how to determine b∗$ b^* $ and the value function and derive some analytical properties of the value function.

Date: 2015
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DOI: 10.1080/03461238.2013.872174

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