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Optimal Bail-Out Dividend Problem with Transaction Cost and Capital Injection Constraint
Risks. 2019. Vol. 7. No. 1. Article 13.
We consider the optimal bail-out dividend problem with fixed transaction cost for a Lévy risk model with a constraint on the expected present value of injected capital. To solve this problem, we first consider the optimal bail-out dividend problem with transaction cost and capital injection and show the optimality of reflected (c_1,c_2) -policies. We then find the optimal Lagrange multiplier, by showing that in the dual Lagrangian problem the complementary slackness conditions are met. Finally, we present some numerical examples to support our results.