Abstract
In the absence of investment and dividend payments, the surplus is modeled by a Brownian motion. But now assume that the surplus earns investment income at a constant rate of credit interest. Dividends are paid to the shareholders according to a barrier strategy. It is shown how the expected discounted value of the dividends and the optimal dividend barrier can be calculated; Kummer’s confluent hypergeometric differential equation plays a key role in this context. An alternative assumption is that business can go on after ruin, as long as it is profitable. When the surplus is negative, a higher rate of debit interest is applied. Several numerical examples document the influence of the parameters on the optimal dividend strategy.
Original language | English |
---|---|
Pages (from-to) | 94-108 |
Journal | North American Actuarial Journal |
Volume | 10 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2006 |
Externally published | Yes |
Fingerprint
Dive into the research topics of 'Optimal Dividends In An Ornstein-Uhlenbeck Type Model With Credit And Debit Interest'. Together they form a unique fingerprint.Cite this
Cai, J., Gerber, H., & Yang, H. (2006). Optimal Dividends In An Ornstein-Uhlenbeck Type Model With Credit And Debit Interest. North American Actuarial Journal, 10(2), 94-108. https://doi.org/10.1080/10920277.2006.10596250