0 between decision and implementation. Using a Brownian motion with drift as the surplus process, we obtain the optimal barrier b* which maximises the expected present value of dividends. We also show that the longer the implementation delay, the smaller the optimal barrier will be."> 0 between decision and implementation. Using a Brownian motion with drift as the surplus process, we obtain the optimal barrier b* which maximises the expected present value of dividends. We also show that the longer the implementation delay, the smaller the optimal barrier will be."> 0 between decision and implementation. Using a Brownian motion with ">
[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/32024.html
   My bibliography  Save this paper

Barrier strategies with Parisian delay

Author

Listed:
  • Dassios, Angelos
  • Wu, Shanle
Abstract
In this paper, we apply the single barrier strategy to optimize the dividend payment in the situation where there is a time lag d > 0 between decision and implementation. Using a Brownian motion with drift as the surplus process, we obtain the optimal barrier b* which maximises the expected present value of dividends. We also show that the longer the implementation delay, the smaller the optimal barrier will be.

Suggested Citation

  • Dassios, Angelos & Wu, Shanle, 2011. "Barrier strategies with Parisian delay," LSE Research Online Documents on Economics 32024, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:32024
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/32024/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paulsen, Jostein & Gjessing, Hakon K., 1997. "Optimal choice of dividend barriers for a risk process with stochastic return on investments," Insurance: Mathematics and Economics, Elsevier, vol. 20(3), pages 215-223, October.
    2. Hans Gerber & Elias Shiu, 2003. "Geometric Brownian Motion Models for Assets and Liabilities: From Pension Funding to Optimal Dividends," North American Actuarial Journal, Taylor & Francis Journals, vol. 7(3), pages 37-51.
    3. Bar-Ilan, Avner & Strange, William C, 1996. "Investment Lags," American Economic Review, American Economic Association, vol. 86(3), pages 610-622, June.
    4. Asmussen, Soren & Taksar, Michael, 1997. "Controlled diffusion models for optimal dividend pay-out," Insurance: Mathematics and Economics, Elsevier, vol. 20(1), pages 1-15, June.
    5. Bjarne Hø Jgaard & Michael Taksar, 1999. "Controlling Risk Exposure and Dividends Payout Schemes:Insurance Company Example," Mathematical Finance, Wiley Blackwell, vol. 9(2), pages 153-182, April.
    6. Dassios, Angelos & Wu, Shanle, 2008. "Parisian ruin with exponential claims," LSE Research Online Documents on Economics 32033, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheung, Eric C.K. & Wong, Jeff T.Y., 2017. "On the dual risk model with Parisian implementation delays in dividend payments," European Journal of Operational Research, Elsevier, vol. 257(1), pages 159-173.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dassios, Angelos & Wu, Shanle, 2009. "On barrier strategy dividends with Parisian implementation delay for classical surplus processes," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 195-202, October.
    2. Pelsser, Antoon A.J. & Laeven, Roger J.A., 2013. "Optimal dividends and ALM under unhedgeable risk," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 515-523.
    3. He, Lin & Liang, Zongxia, 2008. "Optimal financing and dividend control of the insurance company with proportional reinsurance policy," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 976-983, June.
    4. Yuen, Kam C. & Wang, Guojing & Li, Wai K., 2007. "The Gerber-Shiu expected discounted penalty function for risk processes with interest and a constant dividend barrier," Insurance: Mathematics and Economics, Elsevier, vol. 40(1), pages 104-112, January.
    5. Bjarne Højgaard & Michael Taksar, 2004. "Optimal dynamic portfolio selection for a corporation with controllable risk and dividend distribution policy," Quantitative Finance, Taylor & Francis Journals, vol. 4(3), pages 315-327.
    6. Ping Chen & Hailiang Yang, 2010. "Pension funding problem with regime‐switching geometric Brownian motion assets and liabilities," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 26(2), pages 125-141, March.
    7. Xiaoqing Liang & Zbigniew Palmowski, 2016. "A note on optimal expected utility of dividend payments with proportional reinsurance," Papers 1605.06849, arXiv.org, revised May 2017.
    8. He, Lin & Hou, Ping & Liang, Zongxia, 2008. "Optimal control of the insurance company with proportional reinsurance policy under solvency constraints," Insurance: Mathematics and Economics, Elsevier, vol. 43(3), pages 474-479, December.
    9. Guan, Huiqi & Liang, Zongxia, 2014. "Viscosity solution and impulse control of the diffusion model with reinsurance and fixed transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 109-122.
    10. Meng, Hui & Siu, Tak Kuen, 2011. "On optimal reinsurance, dividend and reinvestment strategies," Economic Modelling, Elsevier, vol. 28(1-2), pages 211-218, January.
    11. Liang, Zhibin & Young, Virginia R., 2012. "Dividends and reinsurance under a penalty for ruin," Insurance: Mathematics and Economics, Elsevier, vol. 50(3), pages 437-445.
    12. Leung, Kwai Sun & Kwok, Yue Kuen & Leung, Seng Yuen, 2008. "Finite-time dividend-ruin models," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 154-162, February.
    13. Jukka Isohätälä & Alistair Milne & Donald Robertson, 2020. "The Net Worth Trap: Investment and Output Dynamics in the Presence of Financing Constraints," Mathematics, MDPI, vol. 8(8), pages 1-32, August.
    14. Ran Xu & Wenyuan Wang & Jose Garrido, 2022. "Optimal Dividend Strategy Under Parisian Ruin with Affine Penalty," Methodology and Computing in Applied Probability, Springer, vol. 24(3), pages 1385-1409, September.
    15. Peng, Xiaofan & Chen, Mi & Guo, Junyi, 2012. "Optimal dividend and equity issuance problem with proportional and fixed transaction costs," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 576-585.
    16. Thonhauser, Stefan & Albrecher, Hansjorg, 2007. "Dividend maximization under consideration of the time value of ruin," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 163-184, July.
    17. Ernst, Philip A. & Imerman, Michael B. & Shepp, Larry & Zhou, Quan, 2022. "Fiscal stimulus as an optimal control problem," Stochastic Processes and their Applications, Elsevier, vol. 150(C), pages 1091-1108.
    18. Zhuo Jin & Huafu Liao & Yue Yang & Xiang Yu, 2019. "Optimal Dividend Strategy for an Insurance Group with Contagious Default Risk," Papers 1909.09511, arXiv.org, revised Oct 2020.
    19. Kam C. Yuen & Yuhua Lu & Rong Wu, 2009. "The compound Poisson process perturbed by a diffusion with a threshold dividend strategy," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 25(1), pages 73-93, January.
    20. Sotomayor, Luz R. & Cadenillas, Abel, 2011. "Classical and singular stochastic control for the optimal dividend policy when there is regime switching," Insurance: Mathematics and Economics, Elsevier, vol. 48(3), pages 344-354, May.

    More about this item

    Keywords

    Parisian implementation delay; single barrier strategy; surplus process; Brownian motion with drift;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:32024. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.