The dividend problem with a finite horizon

DOI10.1214/17-AAP1286zbMATH Open1390.60305arXiv1609.01655OpenAlexW2964349992WikidataQ59886122 ScholiaQ59886122MaRDI QIDQ1704142FDOQ1704142

Authors: Tiziano De Angelis, Erik Ekström 

Publication date: 8 March 2018

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: We characterise the value function of the optimal dividend problem with a finite time horizon as the unique classical solution of a suitable Hamilton-Jacobi-Bellman equation. The optimal dividend strategy is realised by a Skorokhod reflection of the fund's value at a time-dependent optimal boundary. Our results are obtained by establishing for the first time a new connection between singular control problems with an absorbing boundary and optimal stopping problems on a diffusion reflected at $0$ and created at a rate proportional to its local time.

Full work available at URL: https://arxiv.org/abs/1609.01655

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zbMATH Keywords

optimal stoppingsingular controldividend problem

Mathematics Subject Classification ID

Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70) Stopping times; optimal stopping problems; gambling theory (60G40) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

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Cited In (17)

• Equity value, bankruptcy, and optimal dividend policy with finite maturity -- variational inequality approach with discontinuous coefficient
• Optimal dividends with partial information and stopping of a degenerate reflecting diffusion
• On the Continuity of Optimal Stopping Surfaces for Jump-Diffusions
• Moment-constrained optimal dividends: precommitment and consistent planning
• Optimal stopping for the exponential of a Brownian bridge
• On a class of non-zero-sum stochastic differential dividend games with regime switching
• A change of variable formula with applications to multi-dimensional optimal stopping problems
• The Maximality Principle in Singular Control with Absorption and Its Applications to the Dividend Problem
• Optimal dividends and capital injection under dividend restrictions
• Fiscal stimulus as an optimal control problem
• Irreversible reinsurance: a singular control approach
• Optimal dividend payout under stochastic discounting
• Time-inconsistent view on a dividend problem with penalty
• Finite horizon optimal dividend and reinsurance problem driven by a jump-diffusion process with controlled jumps
• An optimal dividend problem with capital injections over a finite horizon
• On the free boundary of an annuity purchase
• Global \(C^1\) regularity of the value function in optimal stopping problems

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