On optimal dividends: from reflection to refraction (Q2571216): Difference between revisions

The paper discusses the optimal dividend strategy which maximizes the expected discount dividends until the possible ruin of the company. The model assumes that the equity of the company follows a Weiner process. The optimal strategy here is a generalized barrier, namely, dividends are paid at constant rate if modified equity (equity minus aggregated dividends) above a threshold b and no dividend is paid if modified equity below the threshold b. It is necessary to find the optimal threshold \(b^*\) to make expected discount dividends to be maximized. The idea is originated by Shiryav, Taksar etal. The paper adds some elementary and down to earth calculation and some discussions of the optimal threshold are followed. Then the authors discuss the probability properties for random variables time of ruin and dividends paid until ruin.