Article ID Journal Published Year Pages File Type
1155683 Stochastic Processes and their Applications 2012 23 Pages PDF
Abstract

In Bai and Paulsen [L. Bai, J. Paulsen, Optimal dividend policies with transaction costs for a class of diffusion processes, SIAM J. Control Optim. 48 (2010) 4987–5008] the optimal dividend problem under transaction costs was analyzed for a rather general class of diffusion processes. It was divided into several subclasses, and for the majority of subclasses the optimal policy is a simple barrier policy; whenever the process hits an upper barrier ū∗, reduce it to ū∗−ξ through a dividend payment. After transaction costs, the shareholder receives kξ−Kkξ−K.It was proved that a simple barrier strategy is not always optimal, and here these more difficult cases are solved. The optimal solutions are rather complicated, but interesting.

Related Topics
Physical Sciences and Engineering Mathematics Mathematics (General)
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