22 Pages Posted: 27 Feb 2014
Date Written: February 26, 2014
We analyze the optimal dividend payment problem in the dual model under constant transaction costs. We show, for a general spectrally positive Levy process, an optimal strategy is given by a (c1, c2)-policy that brings the surplus process down to c1 whenever it reaches or exceeds c2 for some 0<=c1< c2. The value function is succinctly expressed in terms of the scale function. A series of numerical examples are provided to confirm the analytical results and to demonstrate the convergence to the no-transaction cost case, which was recently solved by Bayraktar et al. (2013).
Keywords: dual model, dividends, impulse control, spectrally positive Levy processes, scale functions
JEL Classification: C44, C61, G24, G32, G35
Suggested Citation: Suggested Citation
Bayraktar, Erhan and Kyprianou, Andreas E. and Yamazaki, Kazutoshi, Optimal Dividends in the Dual Model Under Transaction Costs (February 26, 2014). Insurance: Mathematics and Economics, Vol. 54, 2014. Available at SSRN: https://ssrn.com/abstract=2401644