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Company value with ruin constraint in a discrete model

Hipp, C.

Abstract:
Optimal dividend payment under a ruin constraint is a two objective control problem which—in simple models—can be solved numerically by three essentially different methods. One is based on a modified Bellman equation and the policy improvement method (see Hipp (2003)). In this paper we use explicit formulas for running allowed ruin probabilities which avoid a complete search and speed up and simplify the computation. The second is also a policy improvement method, but without the use of a dynamic equation (see Hipp (2016)). It is based on closed formulas for first entry probabilities and discount factors for the time until first entry. Third a new, faster and more intuitive method which uses appropriately chosen barrier levels and a closed formula for the corresponding dividend value. Using the running allowed ruin probabilities, a simple test for admissibility—concerning the ruin constraint—is given. All these methods work for the discrete De Finetti model and are applied in a numerical example. The non stationary Lagrange multiplier method suggested in Hipp (2016), Section 2.2.2, also yields optimal dividend strategies which diffe ... mehr

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Verlagsausgabe §
DOI: 10.5445/IR/1000088212
Veröffentlicht am 05.12.2018
Seitenaufrufe: 23
seit 07.12.2018
Downloads: 20
seit 08.12.2018
Zugehörige Institution(en) am KIT Institut für Finanzwirtschaft, Banken und Versicherungen (FBV)
Publikationstyp Zeitschriftenaufsatz
Jahr 2018
Sprache Englisch
Identifikator ISSN: 2227-9091
urn:nbn:de:swb:90-882125
KITopen-ID: 1000088212
Erschienen in Risks
Band 6
Heft 1
Seiten Art. Nr.: 1
Vorab online veröffentlicht am 07.01.2018
Schlagworte stochastic control, optimal dividend payment, ruin probability constraint
Nachgewiesen in Scopus
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