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Optimal dividend and equity issuance problem with proportional and fixed transaction costs. (English) Zbl 1285.91065
Summary: This paper investigates the optimal dividend problem of an insurance company, which controls risk exposure by reinsurance and by issuing new equity to protect from bankruptcy. Transaction costs are incurred by these business activities: reinsurance is non-cheap, dividend is taxed and fixed costs are generated by equity issuance. The goal of the company is to maximize the expected cumulative discounted dividend minus the expected discounted costs of equity issuance. This problem is formulated as a mixed regular-singular-impulse stochastic control problem. By solving the corresponding HJB equation, we obtain the analytical solutions of the optimal return function and the optimal strategy.

91B30 Risk theory, insurance (MSC2010)
93E20 Optimal stochastic control
Full Text: DOI
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