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Dividend Optimization For A Regime-Switching Diffusion Model With Restricted Dividend Rates

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  • Zhu, Jinxia

Abstract

We consider the optimal dividend control problem to find an optimal strategy under the constraint that dividend rates is restricted such that the expected total discounted dividends are maximized for an insurance company. The evolution of the reserve is modeled by a diffusion process with drift and volatility coefficients modulated by an observable Markov chain. We consider the regime-switching threshold strategy which pays out dividends at the maximal possible rate when the current reserve is above some critical level dependent on the regime of the Markov chain at the time, and pays nothing when the reserve is below that level. We give sufficient conditions under which such type of strategy is optimal for the regime-switching model.

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  • Zhu, Jinxia, 2014. "Dividend Optimization For A Regime-Switching Diffusion Model With Restricted Dividend Rates," ASTIN Bulletin, Cambridge University Press, vol. 44(2), pages 459-494, May.
    • Handle: RePEc:cup:astinb:v:44:y:2014:i:02:p:459-494_00
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    Cited by:

    1. Jinhui Zhang & Sachi Purcal & Jiaqin Wei, 2017. "Optimal Time to Enter a Retirement Village," Risks, MDPI, vol. 5(1), pages 1-20, March.
    2. Chongrui Zhu, 2021. "Optimality of threshold strategies for spectrally negative Levy processes and a positive terminal value at creeping ruin," Papers 2107.06841, arXiv.org, revised Jan 2023.
    3. Jinxia Zhu & Hailiang Yang, 2015. "Optimal financing and dividend distribution in a general diffusion model with regime switching," Papers 1506.08360, arXiv.org.

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