A multidimensional problem of optimal dividends with irreversible switching: a convergent numerical scheme

DOI10.1007/S00245-019-09602-0MaRDI QIDQ2041014zbMATH OpenOpenAlexWikidataFDO

Authors Pablo Azcue, Nora Muler

Publication date 15 July 2021

Published in Applied Mathematics and Optimization (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1804.02547

zbMATH Keywords

Hamilton-Jacobi-Bellman equationviscosity solutionsoptimal switchingmultidimensional compound Poisson processconvergence of numerical schemeoptimal dividendsmixed singular/switching control problem

Mathematics Subject Classification ID

Macroeconomic theory (monetary models, models of taxation) (91B64) Hamilton-Jacobi equations (35F21) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Hamilton-Jacobi equations in optimal control and differential games (49L12)

Abstract: In this paper we study the problem of optimal dividend payment strategy which maximizes the expected discounted sum of dividends to a multidimensional set up of n associated insurance companies where the surplus process follows an n-dimensional compound Poisson process. The general manager of the companies has the possibility at any time to exercise an irreversible switch into another regime; we also take into account an expected discounted value at ruin. This multidimensional dividend problem is a mixed singular control/optimal problem. We prove that the optimal value function is a viscosity solution of the associated HJB equation and that it can be characterized as the smallest viscosity supersolution. The main contribution of the paper is to provide a numerical method to approximate (locally uniformly) the optimal value function by an increasing sequence of sub-optimal value functions of admissible strategies defined in an n-dimensional grid. As a numerical example, we present the optimal time of merger for two insurance companies.

Recommendations

• Optimal dividend payment and regime switching in a compound Poisson risk model
• Optimal dividend payments for a two-dimensional insurance risk process
• Optimal dividend strategies for two collaborating insurance companies
• Numerical methods for optimal dividend payment and investment strategies of Markov-modulated jump diffusion models with regular and singular controls
• A two-dimensional dividend problem for collaborating companies and an optimal stopping problem

Cites work

• scientific article; zbMATH DE number 1577097 (Why is no real title available?)
• scientific article; zbMATH DE number 4205918 (Why is no real title available?)
• scientific article; zbMATH DE number 158461 (Why is no real title available?)
• scientific article; zbMATH DE number 5223066 (Why is no real title available?)
• scientific article; zbMATH DE number 3307211 (Why is no real title available?)
• A Note on the Dividends-Penalty Identity and the Optimal Dividend Barrier
• A mixed singular/switching control problem for a dividend policy with reversible technology investment
• Approximation schemes for viscosity solutions of Hamilton-Jacobi equations
• Controlled diffusion models for optimal dividend pay-out
• Convergent Numerical Scheme for Singular Stochastic Control with State Constraints in a Portfolio Selection Problem
• De Finetti's Dividend Problem and Impulse Control for a Two-Dimensional Insurance Risk Process
• De Finetti's optimal dividends problem with an affine penalty function at ruin
• Dividend maximization under consideration of the time value of ruin
• Numerical Methods for Stochastic Singular Control Problems
• OPTIMAL REINSURANCE AND DIVIDEND DISTRIBUTION POLICIES IN THE CRAMER-LUNDBERG MODEL
• On Gerber-Shiu functions and optimal dividend distribution for a Lévy risk process in the presence of a penalty function
• On optimality of the barrier strategy in de Finetti's dividend problem for spectrally negative Lévy processes
• On the Time Value of Ruin
• On the merger of two companies
• On the optimal dividend problem for a spectrally negative Lévy process
• Optimal dividend payment and regime switching in a compound Poisson risk model
• Optimal dividend strategies for two collaborating insurance companies
• Some Optimal Dividends Problems
• Stochastic optimization in insurance. A dynamic programming approach
• Viscosity Solutions of Hamilton-Jacobi Equations

Cited in

(5)

• The optimal time to merge for two insurance companies
• Optimal dividend payment and regime switching in a compound Poisson risk model
• Optimal dividend strategies for two collaborating insurance companies
• Optimal dividend payments for a two-dimensional insurance risk process
• Optimal dividend strategies for a catastrophe insurer

This page was built for publication: A multidimensional problem of optimal dividends with irreversible switching: a convergent numerical scheme

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2041014)