ON THE INTERFACE BETWEEN OPTIMAL PERIODIC AND CONTINUOUS DIVIDEND STRATEGIES IN THE PRESENCE OF TRANSACTION COSTS
AuthorAvanzi, B; Tu, V; Wong, B
Source TitleAstin Bulletin: The Journal of the ASTIN and AFIR Sections of the International Actuarial Association
PublisherCambridge University Press (CUP)
University of Melbourne Author/sAvanzi, Benjamin
Document TypeJournal Article
CitationsAvanzi, B., Tu, V. & Wong, B. (2016). ON THE INTERFACE BETWEEN OPTIMAL PERIODIC AND CONTINUOUS DIVIDEND STRATEGIES IN THE PRESENCE OF TRANSACTION COSTS. Astin Bulletin: The Journal of the ASTIN and AFIR Sections of the International Actuarial Association, 46 (3), pp.708-745. https://doi.org/10.1017/asb.2016.17.
Access StatusOpen Access
In the classical optimal dividends problem, dividend decisions are allowed to be made at any point in time — according to a continuous strategy. Depending on the surplus process that is considered and whether dividend payouts are bounded or not, optimal strategies are generally of a band, barrier or threshold type. In reality, while surpluses change continuously, dividends are generally paid on a periodic basis. Because of this, the actuarial literature has recently considered strategies where dividends are only allowed to be distributed at (random) discrete times — according to a periodic strategy. In this paper, we focus on the Brownian risk model. In this context, the optimal continuous and periodic strategies have previously been shown (independently of one another) to be of barrier type. For the first time, we consider a model where both strategies are used. In such a hybrid strategy, decisions are allowed to be made either at any time (continuously), or periodically at a lower cost. This proves optimal in some cases. We also determine under which combination of parameters a pure continuous, pure periodic or hybrid (including both continuous and periodic dividend payments) barrier strategy is optimal. Interestingly, the hybrid strategy lies in-between periodic and continuous strategies, which provides some interesting insights. Results are illustrated.
- Click on "Export Reference in RIS Format" and choose "open with... Endnote".
- Click on "Export Reference in RIS Format". Login to Refworks, go to References => Import References