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Optimal Stopping of the Compound Binomial Model with Capital Injection Controlled by Optimal Dividend Strategy

In: Proceedings of 20th International Conference on Industrial Engineering and Engineering Management

Author

Listed:
  • Tong-ge Wang

    (Langfang Teachers’ College)

  • Ya Liu

    (College of Science Agricultural University of Hebei)

  • Da-jun Sun

    (Langfang Teachers’ College)

Abstract

We consider the optimal stopping problem, based on the compound binomial model with capital injection controlled by optimal dividend strategy. First, the value function V(x) is established. Second, via the Bellman equation satisfied by the value function V(x) which maximizes the discounted value of define between dividend payment and the penalized discounted capital injection, we find the optimal stopping time τ*. Furthermore an optimal stopping model with capital injection in order to maximize the shareholders’ interests is obtained.

Suggested Citation

  • Tong-ge Wang & Ya Liu & Da-jun Sun, 2013. "Optimal Stopping of the Compound Binomial Model with Capital Injection Controlled by Optimal Dividend Strategy," Springer Books, in: Ershi Qi & Jiang Shen & Runliang Dou (ed.), Proceedings of 20th International Conference on Industrial Engineering and Engineering Management, edition 127, pages 787-796, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-40072-8_79
    DOI: 10.1007/978-3-642-40072-8_79
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