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The Optimal Dividend Problem in the Dual Model

  • Erik Ekström (a1) and Bing Lu (a1)

Abstract

We study de Finetti's optimal dividend problem, also known as the optimal harvesting problem, in the dual model. In this model, the firm value is affected both by continuous fluctuations and by upward directed jumps. We use a fixed point method to show that the solution of the optimal dividend problem with jumps can be obtained as the limit of a sequence of stochastic control problems for a diffusion. In each problem, the optimal dividend strategy is of barrier type, and the rate of convergence of the barrier and the corresponding value function is exponential.

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Copyright

Corresponding author

Postal address: Department of Mathematics, Uppsala University, Box 480, SE-751 06 Uppsala, Sweden.
∗∗ Email address: ekstrom@math.uu.se

References

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The Optimal Dividend Problem in the Dual Model

  • Erik Ekström (a1) and Bing Lu (a1)

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