On a dividend problem with random funding

We consider a modification of the dividend maximization problem from ruin theory. Based on a classical risk process we maximize the difference of expected cumulated discounted dividends and total expected discounted additional funding (subject to some proportional transaction costs). For modelling d...

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Bibliographic Details
Published in:European actuarial journal 2019-12, Vol.9 (2), p.607-633
Main Authors: Strini, Josef Anton, Thonhauser, Stefan
Format: Article
Language:English
Subjects:
Actuarial science
Applications of Mathematics
Costs
Dividends
Economics
Expected values
Financial Services
Funding
Game Theory
Investments
Mathematics
Mathematics and Statistics
Original Research Paper
Quantitative Finance
Random variables
Social and Behav. Sciences
Stockholders
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Summary:We consider a modification of the dividend maximization problem from ruin theory. Based on a classical risk process we maximize the difference of expected cumulated discounted dividends and total expected discounted additional funding (subject to some proportional transaction costs). For modelling dividends we use the common approach whereas for the funding opportunity we use the jump times of another independent Poisson process at which we choose an appropriate funding height. In case of exponentially distributed claims we are able to determine an explicit solution to the problem and derive an optimal strategy whose nature heavily depends on the size of the transaction costs. Furthermore, the optimal strategy identifies unfavourable surplus positions prior to ruin at which refunding is highly recommended.
ISSN:2190-9733
2190-9741
DOI:10.1007/s13385-019-00208-y