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An optimal dividends problem with transaction costs for spectrally negative Lévy processes

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  • Loeffen, R.L.

Abstract

We consider an optimal dividends problem with transaction costs where the reserves are modeled by a spectrally negative Lévy process. We make the connection with the classical de Finetti problem and show in particular that when the Lévy measure has a log-convex density, then an optimal strategy is given by paying out a dividend in such a way that the reserves are reduced to a certain level c1 whenever they are above another level c2. Further we describe a method to numerically find the optimal values of c1 and c2.

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  • Loeffen, R.L., 2009. "An optimal dividends problem with transaction costs for spectrally negative Lévy processes," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 41-48, August.
    • Handle: RePEc:eee:insuma:v:45:y:2009:i:1:p:41-48
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