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Maximizing Dividends without Bankruptcy

Published online by Cambridge University Press:  17 April 2015

Hans U. Gerber ,
Elias S.W. Shiu  and
Nathaniel Smith
Hans U. Gerber
Affiliation:
at The University of Hong Kong, Ecole des hautes études commerciales, Université de Lausanne, CH-1015 Lausanne, Switzerland, E-mail: hgerber@unil.ch
Elias S.W. Shiu
Affiliation:
at The University of Hong Kong, Department of Statistics and Actuarial Science, The University of Iowa, Iowa City, Iowa 52242-1409, USA, E-mail: eshiu@stat.uiowa.edu
Nathaniel Smith
Affiliation:
Ecole des hautes études commerciales, Université de Lausanne, CH-1015 Lausanne, Switzerland, E-mail: nsmith@unil.ch
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Abstract

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Consider the classical compound Poisson model of risk theory, in which dividends are paid to the shareholders according to a barrier strategy. Let b* be the level of the barrier that maximizes the expectation of the discounted dividends until ruin. This paper is inspired by Dickson and Waters (2004). They point out that the shareholders should be liable to cover the deficit at ruin. Thus, they consider b0 , the level of the barrier that maximizes the expectation of the difference between the discounted dividends until ruin and the discounted deficit at ruin. In this paper, b* and b0 are compared, when the claim amount distribution is exponential or a combination of exponentials.

Keywords

Dividendsbarrier strategiesDickson and Waters modificationmixtures and combinations of exponential claim amount distributions
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 36 , Issue 1 , May 2006 , pp. 5 - 23
Copyright
Copyright © ASTIN Bulletin 2006

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