The dividend problem with a finite horizon
Probability
2017-11-27 v4 Optimization and Control
Portfolio Management
Abstract
We characterise the value function of the optimal dividend problem with a finite time horizon as the unique classical solution of a suitable Hamilton-Jacobi-Bellman equation. The optimal dividend strategy is realised by a Skorokhod reflection of the fund's value at a time-dependent optimal boundary. Our results are obtained by establishing for the first time a new connection between singular control problems with an absorbing boundary and optimal stopping problems on a diffusion reflected at and created at a rate proportional to its local time.
Cite
@article{arxiv.1609.01655,
title = {The dividend problem with a finite horizon},
author = {Tiziano De Angelis and Erik Ekström},
journal= {arXiv preprint arXiv:1609.01655},
year = {2017}
}
Comments
21 pages