Dividend maximisation with negative and positive preference rates: a behaviouristic interpretation

14.10.2021 15:45 - 16:30

Julia Eisenberg (TU Wien)

Abstract: In this talk, we look at a dividend maximisation problem under a Brownian surplus and a Markov-switching preference rate model. The preference rate can attain two values - a positive and a negative.
First, we discuss the optimal dividend payout strategy for the setting with a classical ruin concept - the ruin is declared when the surplus becomes negative. In the second part, the setting will be modified by a Parisian ruin with an exponential delay - the ruin is declared if the process stays negative during an exponentially distributed time interval.
In the first case, the optimal strategy turns out to be of a barrier type, being a finite barrier during the positive rate phases and infinite barrier (no dividends are paid) during the negative phases. We show that the finite barrier is a monotone function of regime switching intensities.
In the case of the Parisian delay, the optimal strategy depends on the relation between the expected income rate and the parameter of the exponential delay. The cases of long, medium and short expected delays have to be considered separately in order to find explicit expressions for the value function and the optimal strategy (remaining of a barrier type for short and medium delays). If the expected delay is too long, the optimal strategy in the negative state can change from not paying dividends to a band strategy.
Joint work with Leonie Brinker.


HS 8, 1. OG, OMP 1