On optimal periodic dividend strategies in the dual model with diffusion

Abstract

The dual model with diffusion is appropriate for companies with continuous expenses that are offset by stochastic and irregular gains. Examples include research-based or commission-based companies. In this context, Bayraktar etal. (2013a) show that a dividend barrier strategy is optimal when dividend decisions are made continuously. In practice, however, companies that are capable of issuing dividends make dividend decisions on a periodic (rather than continuous) basis. In this paper, we consider a periodic dividend strategy with exponential inter-dividend-decision times and continuous monitoring of solvency. Assuming hyperexponential gains, we show that a periodic barrier dividend strategy ..