A Note on Realistic Dividends in Actuarial Surplus Models
Loading...
Citations
Scopus:
Altmetric:
Altmetric::
Download
Associated Records
File Licence
Editors
Date
2016-12-01
Source Title
Risks
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI
Melbourne Authors
Affiliation
Economics
Document Type
Journal Article
Subject Code
Citation
Avanzi, B., Tu, V. & Wong, B. (2016). A Note on Realistic Dividends in Actuarial Surplus Models. RISKS, 4 (4), https://doi.org/10.3390/risks4040037.
Access Status
Open Access
Access URL
Open Access URL
Open Access at PMC
Linked Resource URL
NHMRC Grant Code
ARC Grant Code
Description
Abstract
Because of the profitable nature of risk businesses in the long term, de Finetti suggested that surplus models should allow for cash leakages, as otherwise the surplus would unrealistically grow (on average) to infinity. These leakages were interpreted as ‘dividends’. Subsequent literature on actuarial surplus models with dividend distribution has mainly focussed on dividend strategies that either maximise the expected present value of dividends until ruin or lead to a probability of ruin that is less than one (see Albrecher and Thonhauser, Avanzi for reviews). An increasing number of papers are directly interested in modelling dividend policies that are consistent with actual practice in financial markets. In this short note, we review the corporate finance literature with the specific aim of fleshing out properties that dividend strategies should ideally satisfy, if one wants to model behaviour that is consistent with practice.