@techreport{Bandini2020Optimal,
abstract = {Adopting a probabilistic approach we determine the optimal dividend payout policy of a firm whose surplus process follows a controlled arithmetic Brownian motion and whose cash flows are discounted at a stochastic dynamic rate. Dividends can be paid to shareholders at unrestricted rates so that the problem is cast as one of singular stochastic control. The stochastic interest rate is modelled by a Cox-Ingersoll-Ross (CIR) process and the firm's objective is to maximize the total expected ow of discounted dividends until a possible insolvency time. We find an optimal dividend payout policy which is such that the surplus process is kept below an endogenously determined stochastic threshold expressed as a decreasing function r ↦ b(r) of the current interest rate value. We also prove that the value function of the singular control problem solves a variational inequality associated to a second-order, non-degenerate elliptic operator, with a gradient constraint.},
address = {Bielefeld},
author = {Elena Bandini and Tiziano De Angelis and Giorgio Ferrari and Fausto Gozzi},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {G11; 330; Optimal dividend; stochastic interest rates; CIR model; singular control; optimal stopping; free boundary problems},
language = {eng},
note = {urn:nbn:de:0070-pub-29436842},
number = {636},
publisher = {Bielefeld University, Center for Mathematical Economics (IMW)},
title = {Optimal dividend payout under stochastic discounting},
type = {Center for Mathematical Economics Working Papers},
url = {https://hdl.handle.net/10419/227832},
year = {2020}
}