Journal article
The optimal dividend barrier in the Gamma–Omega model
European Actuarial Journal, Vol.1(1), pp.43-55
07/2011
DOI: 10.1007/s13385-011-0006-4
Abstract
In the traditional actuarial risk model, if the surplus is negative, the company is ruined and has to go out of business. In this paper we distinguish between ruin (negative surplus) and bankruptcy (going out of business), where the probability of bankruptcy is a function of the level of negative surplus. The idea for this notion of bankruptcy comes from the observation that in some industries, companies can continue doing business even though they are technically ruined. Assuming that dividends can only be paid with a certain probability at each point of time, we derive closed-form formulas for the expected discounted dividends until bankruptcy under a barrier strategy. Subsequently, the optimal barrier is determined, and several explicit identities for the optimal value are found. The surplus process of the company is modeled by a Wiener process (Brownian motion).
Details
- Title: Subtitle
- The optimal dividend barrier in the Gamma–Omega model
- Creators
- Hansjörg Albrecher - Department of Actuarial Science, Faculty of Business and Economics University of Lausanne 1015 Lausanne SwitzerlandHans Gerber - Department of Actuarial Science, Faculty of Business and Economics University of Lausanne 1015 Lausanne SwitzerlandElias Shiu - Department of Statistics and Actuarial Science University of Iowa Iowa City IA 52242-1409 USA
- Resource Type
- Journal article
- Publication Details
- European Actuarial Journal, Vol.1(1), pp.43-55
- DOI
- 10.1007/s13385-011-0006-4
- ISSN
- 2190-9733
- eISSN
- 2190-9741
- Publisher
- Springer-Verlag; Berlin/Heidelberg
- Language
- English
- Date published
- 07/2011
- Academic Unit
- Statistics and Actuarial Science
- Record Identifier
- 9983985826802771
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