On optimal periodic dividend and capital injection strategies for spectrally negative L\'evy models

TL;DR

This paper studies optimal dividend and capital injection strategies in spectrally negative Lévy models, demonstrating the optimality of a Parisian-classical reflection strategy under certain constraints.

Contribution

It introduces and proves the optimality of a Parisian-classical reflection strategy for dividend payments and bail-outs in spectrally negative Lévy models, extending existing models.

Findings

Optimality of Parisian-classical reflection strategy.

Strategy involves paying excess at Poisson times and reflecting at zero.

Applicable to general spectrally negative Lévy processes.

Abstract

De Finetti's optimal dividend problem has recently been extended to the case dividend payments can only be made at Poisson arrival times. This paper considers the version with bail-outs where the surplus must be nonnegative uniformly in time. For a general spectrally negative L\'evy model, we show the optimality of a Parisian-classical reflection strategy that pays the excess above a given barrier at each Poisson arrival times and also reflects from below at zero in the classical sense.