Optimal periodic dividend strategies for spectrally positive Lévy risk
processes with fixed transaction costs
Benjamin Avanzi; Hayden Lau; Bernard Wong
arXiv2020
20
wong2020optimal
Abstract
We consider the general class of spectrally positive L\'evy risk processes,
which are appropriate for businesses with continuous expenses and lump sum
gains whose timing and sizes are stochastic. Motivated by the fact that
dividends cannot be paid at any time in real life, we study $\textit{periodic}$
dividend strategies whereby dividend decisions are made according to a separate
arrival process.
In this paper, we investigate the impact of fixed transaction costs on the
optimal periodic dividend strategy, and show that a periodic $(b_u,b_l)$
strategy is optimal when decision times arrive according to an independent
Poisson process. Such a strategy leads to lump sum dividends that bring the
surplus back to $b_l$ as long as it is no less than $b_u$ at a dividend
decision time. The expected present value of dividends (net of transaction
costs) is provided explicitly with the help of scale functions. Results are
illustrated.