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Dividend optimization under reserve constraints for the Cramér–Lundberg model compounded by force of interest

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  • Zhu, Jinxia
  • Chen, Feng

Abstract

We study the dividend optimization problem for a company where surplus in the absence of dividend payments follows a Cramér–Lundberg process compounded by constant force of interest. The company controls the times and amounts of dividend payments subject to reserve constraints that dividends are not payable if the surplus is below b0 and that a dividend payment, if any, cannot reduce the surplus to a level below b0, and its objective is to maximize the expected total discounted dividends. We show how the optimality can be achieved under the constraints and construct an optimal strategy of a band type.

Suggested Citation

  • Zhu, Jinxia & Chen, Feng, 2015. "Dividend optimization under reserve constraints for the Cramér–Lundberg model compounded by force of interest," Economic Modelling, Elsevier, vol. 46(C), pages 142-156.
    • Handle: RePEc:eee:ecmode:v:46:y:2015:i:c:p:142-156
    DOI: 10.1016/j.econmod.2014.11.019
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    References listed on IDEAS

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    Cited by:

    1. Feng, Yang & Siu, Tak Kuen & Zhu, Jinxia, 2024. "Optimal payout strategies when Bruno de Finetti meets model uncertainty," Insurance: Mathematics and Economics, Elsevier, vol. 116(C), pages 148-164.
    2. Xixi Yang & Jiyang Tan & Hanjun Zhang & Ziqiang Li, 2017. "An Optimal Control Problem in a Risk Model with Stochastic Premiums and Periodic Dividend Payments," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(03), pages 1-18, June.

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