Optimal Dividends Under Model Uncertainty

DOI10.1137/21M1447453MaRDI QIDQ6159080zbMATHOpenAlexFDO

Authors Prakash Chakraborty, Asaf Cohen, Virginia R. Young

Publication date 1 June 2023

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2109.09137

zbMATH Keywords

model uncertaintystochastic gamethreshold strategyoptimal dividend strategy

Mathematics Subject Classification ID

Actuarial mathematics (91G05) Stochastic games, stochastic differential games (91A15) Optimal stochastic control (93E20)

Abstract: We consider a diffusive model for optimally distributing dividends, while allowing for Knightian model ambiguity concerning the drift of the surplus process. We show that the value function is the unique solution of a non-linear Hamilton-Jacobi-Bellman variational inequality. In addition, this value function embodies a unique optimal threshold strategy for the insurer's surplus, thereby making it the smooth pasting of a non-linear and linear part at the location of the threshold. Furthermore, we obtain continuity and monotonicity of the value function and the threshold strategy with respect to the parameter that measures ambiguity of our model.

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Cited in

(8)

• scientific article; zbMATH DE number 5030024 (Why is no real title available?)
• Optimal dividend-distribution strategy under ambiguity aversion
• Stable dividends under linear-quadratic optimisation
• Optimal dividend policies with random profitability
• Optimal risk exposure and dividend payout policies under model uncertainty
• Optimal dividends and ALM under unhedgeable risk
• A refined asymptotic framework for dividend yield in predictive regressions
• CORPORATE BOND RISK FROM STOCK DIVIDEND UNCERTAINTY

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