A Non-stationary Model of Dividend Distribution in a Stochastic Interest-Rate Setting

作者：Barth Andrea; Moreno Bromberg Santiago^*; Reichmann Oleg

来源：Computational Economics, 2016, 47(3): 447-472.

DOI：10.1007/s10614-015-9502-y

• Dividend distribution
• Singular stochastic control
• Numerical methods for partial differential equations
• Finite element method

In this paper the solutions to several variants of the so-called dividend-distribution problem in a multi-dimensional, diffusion setting are studied. In a nutshell, the manager of a firm must balance the retention of earnings (so as to ward off bankruptcy and earn interest) and the distribution of dividends (so as to please the shareholders). A dynamic-programming approach is used, where the state variables are the current levels of cash reserves and of the stochastic short-rate, as well as time. This results in a family of Hamilton-Jacobi-Bellman variational inequalities whose solutions must be approximated numerically. To do so, a finite element approximation and a time-marching scheme are employed.

• 出版日期2016-3