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Dividend and Capital Injection Optimization with Transaction Cost for Lévy Risk Processes

Author

Listed:
  • Wenyuan Wang

    (Xiamen University)

  • Yuebao Wang

    (Soochow University)

  • Ping Chen

    (The University of Melbourne)

  • Xueyuan Wu

    (The University of Melbourne)

Abstract

The optimal dividends problem has remained an active research field for decades. For an insurance company with reserve modelled by a spectrally negative Lévy process having finite first-order moment, we study the optimal impulse dividend and capital injection (IDCI) strategy for maximizing the expected accumulated discounted net dividend payment subtracted by the accumulated discounted cost of injecting capital. In this setting, the beneficiary of the dividends injects capital to ensure a non-negative risk process so that the insurer never goes bankrupt. The optimal IDCI strategy together with its value function is obtained. Besides, two numerical examples are provided to illustrate the features of the optimal strategies. The impacts of model parameters are also studied.

Suggested Citation

  • Wenyuan Wang & Yuebao Wang & Ping Chen & Xueyuan Wu, 2022. "Dividend and Capital Injection Optimization with Transaction Cost for Lévy Risk Processes," Journal of Optimization Theory and Applications, Springer, vol. 194(3), pages 924-965, September.
    • Handle: RePEc:spr:joptap:v:194:y:2022:i:3:d:10.1007_s10957-022-02057-4
    DOI: 10.1007/s10957-022-02057-4
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    References listed on IDEAS

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