Optimal dividends under Markov-modulated bankruptcy level. (English) Zbl 1503.91088
The paper focuses on an optimal dividend problem under a main assumption: the dynamics of the company’s cash surplus and the bankruptcy level are modulated by a two-state continuous-time Markov chain. After formalizing the model, the Hamilton-Jacobi-Bellman equation related to the optimal dividend problem is derived as a system of two coupled variational inequalities. Then, the optimal dividend policy is obtained in four cases, and some numerical insights describe the impact of different bankruptcy levels, as well as the sensitivity of the optimal solution with respect to the model’s parameters. In-depth technical discussions and proofs are collected in Appendix.
Reviewer: Emilia Di Lorenzo (Napoli)
Keywords:
optimal dividend policy; regime-switching; regime-dependent bankruptcy levels; HJB equation; singular stochastic controlReferences:
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