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Dividend payments in the classical risk model under absolute ruin with debit interest

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  • Chunwei Wang
  • Chuancun Yin

Abstract

This paper attempts to study the dividend payments in a compound Poisson surplus process with debit interest. Dividends are paid to the shareholders according to a barrier strategy. An alternative assumption is that business can go on after ruin, as long as it is profitable. When the surplus is negative, a debit interest is applied. At first, we obtain the integro‐differential equations satisfied by the moment‐generating function and moments of the discounted dividend payments and we also prove the continuous property of them at zero. Then, applying these results, we get the explicit expressions of the moment‐generating function and moments of the discounted dividend payments for exponential claims. Furthermore, we discuss the optimal dividend barrier when the claim sizes have a common exponential distribution. Finally, we give the numerical examples for exponential claims and Erlang (2) claims. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Chunwei Wang & Chuancun Yin, 2009. "Dividend payments in the classical risk model under absolute ruin with debit interest," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 25(3), pages 247-262, May.
    • Handle: RePEc:wly:apsmbi:v:25:y:2009:i:3:p:247-262
    DOI: 10.1002/asmb.722
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    References listed on IDEAS

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    Cited by:

    1. Jun Cai & Hailiang Yang, 2014. "On the decomposition of the absolute ruin probability in a perturbed compound Poisson surplus process with debit interest," Annals of Operations Research, Springer, vol. 212(1), pages 61-77, January.

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