Optimal dividend and capital injection problem in the dual model with proportional and fixed transaction costs

Dingjun Yao, Hailiang Yang*, Rongming Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

75 Citations (Scopus)

Abstract

In this paper we consider the dividend payments and capital injections control problem in a dual risk model. Such a model might be appropriate for a company that specializes in inventions and discoveries, which pays costs continuously and has occasional profits. The objective is to maximize the expected present
value of the dividends minus the discounted costs of capital injections. This paper can be considered as an extension of Yao et al. (2010), we include fixed transaction costs incurred by capital injections in this paper. This leads to an impulse control problem. Using the techniques of quasi-variational inequalities (QVI), this optimal control problem is solved. Numerical solutions are provided to illustrate the idea
and methodologies, and some interesting economic insights are included.
Original languageEnglish
Pages (from-to)568-576
JournalEuropean Journal of Operational Research
Volume211
DOIs
Publication statusPublished - 2011
Externally publishedYes

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