Optimal Hybrid Dividend Strategy Under The Markovian Regime-Switching Economy

TL;DR

This paper analyzes an optimal hybrid dividend strategy for a company with a surplus process modeled by a regime-switching diffusion, aiming to maximize discounted dividends with an analytical solution under a Markovian economy.

Contribution

It introduces a hybrid dividend strategy model considering regime-switching economies and provides an analytical solution for the value function in a two-regime setting.

Findings

Derived the analytical form of the value function.

Optimized dividend policies under regime-switching dynamics.

Demonstrated the effectiveness of hybrid strategies in maximizing dividends.

Abstract

In this paper, we consider the optimal dividend problem for a company. We describe the surplus process of the company by a diffusion model with regime switching. The aim of the company is to choose a dividend policy to maximize the expected total discounted payments until ruin. In this article, we consider a hybrid dividend strategy, that is, the company is allowed to conduct continuous dividend strategy as well as impulsive dividend strategy. In addition, we consider the change of economy, which is characterized by a markovian regime-switching, and under the setting of two regimes, we solve the problem and obtain the analytical solution for the value function.