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A Unified Treatment of Dividend Payment Problems under Fixed Cost and Implementation Delays

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  • Erhan Bayraktar
  • Masahiko Egami

Abstract

In this paper we solve the dividend optimization problem for a corporation or a financial institution when the managers of the corporation are facing (regulatory) implementation delays. We consider several cash reservoir models for the firm including two mean-reverting processes, Ornstein-Uhlenbeck and square-root processes. We provide our solution via a new characterization of the value function for one-dimensional diffusions and provide easily implementable algorithms to find the optimal control and the value function.

Suggested Citation

  • Erhan Bayraktar & Masahiko Egami, 2007. "A Unified Treatment of Dividend Payment Problems under Fixed Cost and Implementation Delays," Papers math/0703825, arXiv.org, revised Jan 2009.
    • Handle: RePEc:arx:papers:math/0703825
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    1. Alvarez, Luis H. R. & Keppo, Jussi, 2002. "The impact of delivery lags on irreversible investment under uncertainty," European Journal of Operational Research, Elsevier, vol. 136(1), pages 173-180, January.
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    4. Bayraktar, Erhan & Egami, Masahiko, 2007. "The effects of implementation delay on decision-making under uncertainty," Stochastic Processes and their Applications, Elsevier, vol. 117(3), pages 333-358, March.
    5. Michael I. Taksar, 2000. "Optimal risk and dividend distribution control models for an insurance company," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 51(1), pages 1-42, February.
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    Cited by:

    1. Benjamin Avanzi & Hayden Lau & Bernard Wong, 2020. "On the optimality of joint periodic and extraordinary dividend strategies," Papers 2006.00717, arXiv.org, revised Dec 2020.
    2. Dai, Min & Huang, Shan & Keppo, Jussi, 2019. "Opaque bank assets and optimal equity capital," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 369-394.
    3. Elena Bandini & Tiziano De Angelis & Giorgio Ferrari & Fausto Gozzi, 2022. "Optimal dividend payout under stochastic discounting," Mathematical Finance, Wiley Blackwell, vol. 32(2), pages 627-677, April.
    4. Erhan Bayraktar & Masahiko Egami, 2008. "Optimizing venture capital investments in a jump diffusion model," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 67(1), pages 21-42, February.
    5. Avanzi, Benjamin & Lau, Hayden & Wong, Bernard, 2021. "On the optimality of joint periodic and extraordinary dividend strategies," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1189-1210.

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