Convexity and smoothness of scale functions and de Finetti's control problem

DOI10.1007/S10959-009-0220-ZMaRDI QIDQ975331zbMATH OpenOpenAlexFDO

Authors Renming Song, A. E. Kyprianou, Víctor Manuel Rivero

Publication date 9 June 2010

Published in Journal of Theoretical Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0801.1951

zbMATH Keywords

control theorypotential analysisscale functions for spectrally negative Lévy processesspecial Bernstein function

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Markov processes (60J99) Optimal stochastic control (93E20)

Abstract: Under appropriate conditions, we obtain smoothness and convexity properties of $q$-scale functions for spectrally negative L'evy processes. Our method appeals directly to very recent developments in the theory of potential analysis of subordinators. As an application of the latter results to scale functions, we are able to continue the very recent work of cite{APP2007} and cite{Loe}. We strengthen their collective conclusions by showing, amongst other results, that whenever the L'evy measure has a density which is log convex then for $q>0$ the scale function $W^{(q)}$ is convex on some half line $(a^{\ast },infty)$ where $a^{\ast }$ is the largest value at which $W^{(q)prime}$ attains its global minimum. As a consequence we deduce that de Finetti's classical actuarial control problem is solved by a barrier strategy where the barrier is positioned at height $a^{\ast }$.

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Cited in

(35)

• A time of ruin constrained optimal dividend problem for spectrally one-sided Lévy processes
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