Equilibrium Strategies for Singular Dividend Control Problems under the Mean-Variance Criterion
Abstract
We revisit the optimal dividend problem of de Finetti by adding a variance term to the usual criterion of maximizing the expected discounted dividends paid until ruin, in a singular control framework. Investors do not like variability in their dividend distribution, and the mean-variance (MV) criterion balances the desire for large expected dividend payments with small variability in those payments. The resulting MV singular dividend control problem is time-inconsistent, and we follow a game-theoretic approach to find a time-consistent equilibrium strategy. Our main contribution is a new verification theorem for the novel dividend problem, in which the MV criterion is applied to an integral of the control until ruin, a random time that is endogenous to the problem. We demonstrate the use of the verification theorem in two cases for which we obtain the equilibrium dividend strategy (semi-)explicitly, and we provide a numerical example to illustrate our results.
Keywords
Cite
@article{arxiv.2511.08433,
title = {Equilibrium Strategies for Singular Dividend Control Problems under the Mean-Variance Criterion},
author = {Jingyi Cao and Dongchen Li and Virginia R. Young and Bin Zou},
journal= {arXiv preprint arXiv:2511.08433},
year = {2025}
}