Optimal Stopping of the Compound Binomial Model with Capital Injection Controlled by Optimal Dividend Strategy

Tong-ge Wang (), Ya Liu and Da-jun Sun
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Tong-ge Wang: Langfang Teachers’ College
Ya Liu: College of Science Agricultural University of Hebei
Da-jun Sun: Langfang Teachers’ College

A chapter in Proceedings of 20th International Conference on Industrial Engineering and Engineering Management, 2013, pp 787-796 from Springer

Abstract: Abstract We consider the optimal stopping problem, based on the compound binomial model with capital injection controlled by optimal dividend strategy. First, the value function V(x) is established. Second, via the Bellman equation satisfied by the value function V(x) which maximizes the discounted value of define between dividend payment and the penalized discounted capital injection, we find the optimal stopping time τ*. Furthermore an optimal stopping model with capital injection in order to maximize the shareholders’ interests is obtained.

Keywords: Bellman equation; Compound binomial model; Capital injection; Dividend injection; Optimal stopping (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-40072-8_79

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DOI: 10.1007/978-3-642-40072-8_79

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