Abstract
In this paper we consider the optimal dividend strategy under the diffusion model with
regime switching. In contrast to the classical risk theory, the dividends can only be paid
at the arrival times of a Poisson process. By solving an auxiliary optimal problem we
show that the optimal strategy is the modulated barrier strategy. The value function can be
obtained by iteration or by solving the system of differential equations. We also provide a
numerical example to illustrate the effects of the restriction on the timing of the payment
of dividends.
regime switching. In contrast to the classical risk theory, the dividends can only be paid
at the arrival times of a Poisson process. By solving an auxiliary optimal problem we
show that the optimal strategy is the modulated barrier strategy. The value function can be
obtained by iteration or by solving the system of differential equations. We also provide a
numerical example to illustrate the effects of the restriction on the timing of the payment
of dividends.
| Original language | English |
|---|---|
| Pages (from-to) | 886-906 |
| Journal | Advances in Applied Probability |
| Volume | 44 |
| DOIs | |
| Publication status | Published - 2012 |
| Externally published | Yes |