Abstract: As a widely discussed topic, the dividend optimization problem is to determine the times and the amount of dividend payments such that the expected value of the cumulated discounted dividends will be maximized, which, sometimes, is considered as the value of the company. We first review the commonly used approach in solving this problem in a variety of situations in the literature. Then the applicability of such approach to generalized models is examined and the main technical issues that may arise when applying the approach to general models are pointed out. Furthermore, we study a more sophisticated model with external impacts included, where the above-mentioned common approach does not work. The method of solving the optimization problem in this case is demonstrated and the obtained results are discussed.
Tea Time: 3:30pm R707