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Document Details :

Title: A Note on the Dividends-Penalty Identity and the Optimal Dividend Barrier
Author(s): GERBER, Hans U. , LIN, X. , YANG, Hailiang
Journal: ASTIN Bulletin
Volume: 36    Issue: 2   Date: 2006   
Pages: 489-503
DOI: 10.2143/AST.36.2.2017931

Abstract :
For a general class of risk models, the dividends-penalty identity is derived by
probabilistic reasoning. This identity is the key for understanding and determining
the optimal dividend barrier, which maximizes the difference between the
expected present value of all dividends until ruin and the expected discounted
value of a penalty at ruin (which is typically a function of the deficit at ruin).
As an illustration, the optimal barrier is calculated in two classical models, for
different penalty functions and a variety of parameter values.