A Numerical Approach to Optimal Dividend Policies with Capital Injections and Transaction Costs

This work focuses on numerical methods for finding optimal dividend payment and capital injection
policies to maximize the present value of the difference between the cumulative dividend payment and the possible
capital injections. Using dynamic programming principle, the value function obeys a quasi-variational inequality
(QVI). The state constraint of the impulsive control gives rise to a capital injection region with free boundary.
Since the closed-form solutions are virtually impossible to obtain, we use Markov chain approximation techniques
to construct a discrete-time controlled Markov chain to approximate the value function and optimal controls.
Convergence of the approximation algorithms is proved.