Periodic Dividend Research Articles

Pricing forward-start style exotic options under uncertain stock models with periodic dividends

<p>In this study, we derived pricing formulas for various forward-start style exotic options based on an uncertain stock models with periodic dividends. Specifically, we present valuations for forward-start, Cliquet/Ratchet, and spread options. In addition, we conducted numerical simulations of these formulas and compared them to pricing formulas for the same options based on a dividend-paying stock model driven by standard Brownian motion.</p>

Optimal periodic dividends with penalty payments under a diffusion model

In this work, we examine the optimal periodic dividend problem with penalty payments for a diffusion model, where dividends are only paid at Poisson arrival times. Moreover, we assume that (observed) ruin or bankruptcy does not occur even if the surplus is negative, but the penalty payments happen. The goal is to seek an optimal periodic dividend strategy to maximize the expectation of the difference between the present value of dividends and penalty payments. We demonstrate that the optimal strategy is a periodic barrier strategy. For the exponential penalty function, the optimal periodic barrier and the explicit expression for the value function are determined. Several numerical instances are also presented.

On the bailout dividend problem with periodic dividend payments for spectrally negative Markov additive processes

This paper studies the bailout optimal dividend problem with regime switching under the constraint that dividend payments can be made only at the arrival times of an independent Poisson process while capital can be injected continuously in time. We show the optimality of the regime-modulated Parisian-classical reflection strategy when the underlying risk model follows a general spectrally negative Markov additive process. In order to verify the optimality, first we study an auxiliary problem driven by a single spectrally negative Lévy process with a final payoff at an exponential terminal time and characterize the optimal dividend strategy. Then, we use the dynamic programming principle to transform the global regime-switching problem into an equivalent local optimization problem with a final payoff up to the first regime switching time. The optimality of the regime modulated Parisian-classical barrier strategy can be proven by using the results from the auxiliary problem and approximations via recursive iterations.

The Effect of Dividend Payouts and Non-Payouts on the Share Price and Market Capitalization: An Empirical Study of Selected Indian Companies

Distribution of dividends is a challenging and critical decision for corporate companies. An effective dividend policy is essential for striking a balance between meeting shareholders’ expectations and the future financial needs of corporate companies. The periodic dividend payout will boost investors' and shareholders' confidence and help the company to build a strong reputation, but it will deteriorate the financial reserves of the company. The non-payment of dividends, however, will result in cost-effective surplus reserves for companies’ future operations. In this complex situation, two questions need to be answered with dividend non-paying companies’ price action, and the same need to be justified empirically: Do dividend payouts uplift the demand for shares of the company, causing prices to take an uptrend in the stock market as a post-effect? Do the dividend payouts help in building the overall market valuation of the company? For this study, six public companies listed on the National Stock Exchange of India were selected using the judgmental sampling method: Tech Mahindra, TCS, and Maruti Suzuki as dividend-paying companies; Mahindra CIE, Godrej Properties, and Indiabulls Real Estate as non-paying dividend companies. Their price action in response to the dividend payout and non-payout are considered and carefully analyzed using the Microsoft Excel application. The price changes in response to dividend payouts were evaluated for four consecutive years; their effect on market capitalization was also assessed, and findings were presented separately for regular dividend-paying and non-paying companies. The study concluded that Tech Mahindra, TCS, and Maruti Suzuki showed phenomenal price growth, and market capitalization was seen soon after the dividend declaration. In contrast, Mahindra CIE, Godrej Properties, and Indiabulls Real Estate prices declined in response to dividend non-payouts. Hence, it is concluded that dividend payouts have several positive effects, such as improving investor goodwill and increasing investment inflows, which in turn leads to an increase in share price and market capitalization.

The dual risk model under a mixed ratcheting and periodic dividend strategy

In this article, we consider an extended dual risk model under a mixed dividend strategy, which is a combination of ratcheting dividend strategy and periodic dividend strategy. The expected present value of dividends paid up to ruin is studied by using Lévy fluctuation theory, and its accurate expression is given in terms of scale functions. Numerical analysis under three different gain distributions is given for characterizing the impact of parameters on the expected present value of dividends paid up to ruin.

Optimal periodic dividend strategies for spectrally negative Lévy processes with fixed transaction costs

ABSTRACT Maximising dividends is one classical stability criterion in actuarial risk theory. Motivated by the fact that dividends are paid periodically in real life, periodic dividend strategies were recently introduced (Albrecher et al. 2011). In this paper, we incorporate fixed transaction costs into the model and study the optimal periodic dividend strategy with fixed transaction costs for spectrally negative Lévy processes. The value function of a periodic strategy is calculated by means of exiting identities and Itô's excusion when the surplus process is of unbounded variation. We show that a sufficient condition for optimality is that the Lévy measure admits a density which is completely monotonic. Under such assumptions, a periodic strategy is confirmed to be optimal. Results are illustrated.

On the improved thinning risk model under a periodic dividend barrier strategy

<abstract><p>In this study, we consider a periodic dividend barrier strategy in an improved thinning risk model, which indicates that insurance companies randomly receive premiums and pay dividends. In the improved model, the premium is stochastic, and the claim counting process is a p-thinning process of the premium counting process. The integral equations satisfied by the Gerber-Shiu function and the expected discounted cumulative dividend function are derived. Explicit expressions of those actuarial functions are obtained when the claim and premium sizes are exponentially distributed. We analyze and illustrate the impact of various parameters on them and obtain the optimal barrier. Finally, a conclusion is drawn.</p></abstract>

Periodic dividends and capital injections for a spectrally negative Lévy risk process under absolute ruin

The spectrally negative Levy risk model with random observation times is considered in this paper, in which both dividends and capital injections are made at some independent Poisson observation times. Under the absolute ruin, the expected discounted dividends and the expected discounted capital injections are discussed. We also study the joint Laplace transforms including the absolute ruin time and the total dividends or the total capital injections. All the results are expressed in scale functions.

Sovereign wealth fund (SWF): a tool for diversifying Nigeria’s emerging economy

Sovereign Wealth Fund (SWF) has continued to receive increasing global attention especially since after the last widespread financial crisis of 2008-2009.This study therefore attempted to understudy the phenomenon in the context of its usefulness as a tool for diversifying the economic horizon of some emerging economies like Nigeria. Adopting a qualitative approach to study the concept’s operation, drawbacks and benefits, the study found out that a sovereign wealth fund, when instituted and properly managed, can be used to stabilize or bail out an economy in distress, widen a country’s revenue generation window, provide social security to citizens of a country through pension payments, reduce poverty in society through the payment of periodic dividends, check profligate spending, create a pool of savings upon which the future generation can stand to face future challenges and create an opportunity for mutually beneficial cross pollination of management skills among states that subscribe to the Santiago Principle.

Option pricing formulas for uncertain exponential Ornstein–Uhlenbeck model with dividends

Uncertain finance is an application to the finance of the uncertainty theory which provides an alternative analysis method from the probability theory under the circumstance that few samples are available. Under the research paradigm of uncertain finance, some financial assets are investigated and modeled with various tools in order to describe the price fluctuation accurately. This paper models the prices of stocks under uncertain finance based on the exponential Ornstein–Uhlenbeck model with periodic dividends. Through the $$\alpha $$ -path method, the pricing formulas are derived for European call and put options whose underlying assets follow the proposed stock model. In addition, some numerical algorithms to calculate the option prices are designed.

Optimal periodic dividend strategies for spectrally positive Lévy risk processes with fixed transaction costs

We consider the general class of spectrally positive Lévy risk processes, which are appropriate for businesses with continuous expenses and lump sum gains whose timing and sizes are stochastic. Motivated by the fact that dividends cannot be paid at any time in real life, we study periodic dividend strategies whereby dividend decisions are made according to a separate arrival process.In this paper, we investigate the impact of fixed transaction costs on the optimal periodic dividend strategy, and show that a periodic (bu,bl) strategy is optimal when decision times arrive according to an independent Poisson process. Such a strategy leads to lump sum dividends that bring the surplus back to bl as long as it is no less than bu at a dividend decision time. The expected present value of dividends (net of transaction costs) is provided explicitly with the help of scale functions. Results are illustrated.

Equilibrium periodic dividend strategies with non-exponential discounting for spectrally positive Lévy processes

<p style='text-indent:20px;'>In the dual risk model, we study the periodic dividend problem with a non-exponential discount function which results in a time-inconsistent control problem. Viewing it within the game theoretic framework, we extend the Hamilton-Jacobi-Bellman (HJB) system of equations from the fixed terminal to the time of ruin and derive the verification theorem, and we generalize the theory of classical optimal periodic dividend. Under two special non-exponential discount functions, we obtain the closed-form expressions of equilibrium strategy and the corresponding equilibrium value function in a compound Poisson dual model. Finally, some numerical examples are presented to illustrate the impact of some parameters.

On Periodic Dividends for the Classical Risk Model with Debit Interest

A periodic dividend problem is studied in this paper. We assume that dividend payments are made at a sequence of Poisson arrival times, and ruin is continuously monitored. First of all, three integro-differential equations for the expected discounted dividends are obtained. Then, we investigate the explicit expressions for the expected discounted dividends, and the optimal dividend barrier is given for exponential claims. A similar study on a generalized Gerber–Shiu function involving the absolute time is also performed. To demonstrate the existing results, we give some numerical examples.

On the dual risk model with diffusion under a mixed dividend strategy

Inspired by the work of Zhang and Han (2017), this paper investigates a dual model with diffusion where dividends are paid under a mixed strategy. This strategy is composed of two parts: dividends will be paid continuously at a fixed rate α > 0 as long as the surplus process is above a fixed threshold level b > 0; for a pre-specified sequence of strictly increasing periodic dividend decision times {Zj}j ≥ 1, whenever the surplus level observed at Zj is above b, the excess value will also be paid out as dividend. In addition, ruin is declared when the observed surplus equals to 0 for the first time. The integro-differential equations satisfied by the expected present value of dividends paid up to ruin (i.e., V(x; b)) and the Laplace transform of the ruin time (i.e., Φ(x; b)) are derived. The solutions of V and Φ are constructed by the method of inverse Laplace transform and through some auxiliary functions. Finally, several numerical examples are provided to illustrate our results.

On a spectrally negative Lévy risk process with periodic dividends and capital injections

In this paper, we investigate a spectrally negative Lévy risk model with both dividends and capital injections being made at independent Poisson observation times. Probability generating functions of the number of dividend payments and the number of capital injections are obtained. All the results are expressed in terms of scale functions.

A perturbed risk model with constant interest and periodic barrier dividend strategy

This paper studies the discounted Gerber-Shiu type function for a perturbed actuarial risk model with interest and periodic dividend strategy. Under the assumption of exponentially distributed inter-observation times, some integro-differential equations of the discounted Gerber-Shiu type function at ruin are presented. For exponential claim amounts, explicit expressions satisfied by the Laplace transforms of ruin time are provided and some numerical examples are investigated to demonstrate our results.

EFEK PENGUMUMAN KEBIJAKAN DIVIDEN TERHADAP RETURN SAHAM YANG TERGOLONG JAKARTA ISLAMIC INDEXS

This research aims to test dividend signaling theory in the Jakarta Islamic Index groups. Signaling theory states that dividend policy has information content that can influence to share price. This research usesamples in the form of company allocating dividend for period 2006-2007 which listed on Jakarta Islamic Index. Final samples which are utilized in this research are equal to 12 firms observation. Using the event-study method, the result of our research shows that at the significant level of 5%, there is only one working days which yield the abnormal return that is significant at the dividend announcements. Those are the sixth day before the event date with the value of 0.00889 or around 0.9%. The final conclusion is that stock price will negatively reacted to the announcement of dividend. Overall, the evidence tends to support the dividend irrelevancy hypothesis, but does not provide a support for the signaling theory. Evidence also indicates that dividend payment does not signal any information to the investors, which needs to be further investigated.

Optimality of Hybrid Continuous and Periodic Barrier Strategies in the Dual Model

Avanzi et al. (ASTIN Bull 46(3): 709–746, 2016) recently studied an optimal dividend problem where dividends are paid both periodically and continuously with different transaction costs. In the Brownian model with Poissonian periodic dividend payment opportunities, they showed that the optimal strategy is either of the pure-continuous, pure-periodic, or hybrid-barrier type. In this paper, we generalize the results of their previous study to the dual (spectrally positive Levy) model. The optimal strategy is again of the hybrid-barrier type and can be concisely expressed using the scale function. These results are confirmed through a sequence of numerical experiments.

On optimal periodic dividend strategies for Lévy risk processes

In this paper, we revisit the optimal periodic dividend problem, in which dividend payments can only be made at the jump times of an independent Poisson process. In the dual (spectrally positive Lévy) model, recent results have shown the optimality of a periodic barrier strategy, which pays dividends at Poissonian dividend-decision times, if and only if the surplus is above some level. In this paper, we show the optimality of this strategy for a spectrally negative Lévy process whose dual has a completely monotone Lévy density. The optimal strategies and value functions are concisely written in terms of the scale functions. Numerical results are also provided.

Optimality of Hybrid Continuous and Periodic Barrier Strategies in the Dual Model

Avanzi et al. (2016) recently studied an optimal dividend problem where dividends are paid both periodically and continuously with different transaction costs. In the Brownian model with Poissonian periodic dividend payment opportunities, they showed that the optimal strategy is either of the pure-continuous, pure-periodic, or hybrid-barrier type. In this paper, we generalize the results of their previous study to the dual (spectrally positive Levy) model. The optimal strategy is again of the hybrid-barrier type and can be concisely expressed using the scale function. These results are confirmed through a sequence of numerical experiments.