Dividend optimization for a jump diffusion model

Official URL: http://192.168.1.20/record=b1302874 (Table of Contents)

We consider a dividend optimization problem where the objective is to maximize the expected value of total dividends paid during the lifetime of a company. The capital process is assumed to be a jump-diffusion, and dividends are paid out continuously until the capital process hits a default barrier. At any time, the company may distribute dividends at full rate; however, this would bring the capital process closer to the ruin barrier. Hence, we need to find a strategy (from a given admissible set) that will resolve this trade-off optimally. Here, we show that the structure of the optimal policy depends on the parameters of the problem. We identify an optimal policy for different cases, and we show how to compute the value function of the problem.