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Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an efficient moment based approximation method for option pri…
This paper studies the optimal dividend for a multi-line insurance group, in which each subsidiary runs a product line and is exposed to some external credit risk. The default contagion is considered such that one default event may increase the default probabilities of all surviving subsidiaries. The total dividend problem for the insurance group is investigated and we find that the optimal dividend strategy is still…
This paper studies a singular dividend control problem for a firm with heterogeneous shareholders whose discount rates follow a given distribution. The central planner aggregates expected discounted payoffs using an ambiguity aggregation function $phi$, which captures shareholder heterogeneity and ambiguity attitudes but also leads to time inconsistency. To address this issue, we seek a time-homogeneous equilibrium d…
This paper studies the optimal dividend problem with capital injection under the constraint that the cumulative dividend strategy is absolutely continuous. We consider an open problem of the general spectrally negative case and derive the optimal solution explicitly using the fluctuation identities of the refracted-reflected Lévy process. The optimal strategy as well as the value function are concisely written in ter…
We study the optimal financing and dividend distribution problem with restricted dividend rates in a diffusion type surplus model where the drift and volatility coefficients are general functions of the level of surplus and the external environment regime. The environment regime is modeled by a Markov process. Both capital injections and dividend payments incur expenses. The objective is to maximize the expectation o…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from current consumption and from gains and losses in consumption with respect to a forward-looking, stochastic reference point. First, we consider a general model in which the agent's p…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction assumption is equivalent to the existence of a risk-neutral measure. We derive dual representations for the superhedging ask and subhedging bid price processes of a derivative contract. Our…
We investigate a joint optimization problem of dividend payments and capital injections for a surplus process driven by a general diffusion. Dividend payments are assumed to be absolutely continuous in time, with the dividend rate bounded by a nonnegative concave function of the current surplus; while capital injections are modelled by a general nondecreasing process. We first analyze an auxiliary bail-out problem in…
We study optimal dividend strategies for an insurance company facing natural catastrophe claims, anticipating the arrival of a climate tipping point after which the claim intensity and/or the claim size distribution of the underlying risks deteriorates irreversibly. Extending earlier literature based on a shot-noise Cox process assumption for claim arrivals, we show that the non-stationary feature of such a tipping p…
This paper studies an optimal dividend problem with a drawdown constraint in a Brownian motion model, requiring the dividend payout rate to remain above a fixed proportion of its historical maximum. This leads to a path-dependent stochastic control problem, as the admissible control depends on its own past values. The associated Hamilton-Jacobi-Bellman (HJB) equation is a novel two-dimensional variational inequality …
We consider an optimal stochastic control problem in which a firm's cash/surplus process is controlled by dividend payments and capital injections. Stockholders aim to maximize their dividend stream minus the cost of injecting capital, if needed. We consider absolutely continuous dividend policies subject to a level-dependent upper bound on the dividend rate while we allow for general capital injections behavior. We …
This paper is concerned with a long standing optimal dividend payout problem subject to the so-called ratcheting constraint, that is, the dividend payout rate shall be non-decreasing over time and is thus self-path-dependent. The surplus process is modeled by a drifted Brownian motion process and the aim is to find the optimal dividend ratcheting strategy to maximize the expectation of the total discounted dividend p…
This study examines the impact of dividend policy on the performance of initial public offerings in India. The period of study is from the year 2011-2014. Monthly returns of the IPOs issued in the considered period and the Indian Stock Market Index (Nifty 50) were considered for the long-run performance study. The methodological tools used are long-run performance statistics and the GARCH model. The Dummy variable wa…
This paper studies a dynamic optimal reinsurance and dividend-payout problem for an insurance company in a finite time horizon. The goal of the company is to maximize the expected cumulative discounted dividend payouts until bankruptcy or maturity which comes earlier. The company is allowed to buy reinsurance contracts dynamically over the whole time horizon to cede its risk exposure with other reinsurance companies.…
We investigate how the relationship between managerial stock incentives and the dividend payout policy is impacted by the business cycle by using the data of S&P 1500 companies during 2000-2018. We find a strong negative relationship between managerial stock options and annual dividend payouts of companies for the full sample. Although the direction of the relationship is also negative for the recession period, the c…
In this paper, we propose the discrete time Compound Beta-Binomial Risk Model with by-claims, delayed by-claims and randomized dividends. We then analyze the Gerber-Shiu function for the cases where the dividend threshold $d=0$ and $d>0$ under the assumption that the constant discount rate $ν\in (0,1)$. More specifically, we study the discrete time compound binomial risk model subject to the assumption that the proba…
Dividend yields have been widely used in previous research to relate stock market valuations to cash flow fundamentals. However, this approach relies on the assumption that dividend yields are stationary. Due to the failure to reject the hypothesis of a unit root in the classical dividend-price ratio for the US stock market, Polimenis and Neokosmidis (2016) proposed the use of a modified dividend price ratio (mdp) as…
This paper studies the bail-out optimal dividend problem with regime switching under the constraint that the cumulative dividend strategy is absolutely continuous. We confirm the optimality of the regime-modulated refraction-reflection strategy when the underlying risk model follows a general spectrally negative Markov additive process. To verify the conjecture of a barrier type optimal control, we first introduce an…
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
A dividend is a cash (or stock) distribution of residual earnings to shareholders, declared by the board and not a contractual coupon.
Dividend yield is annual dividends per share divided by price — the income run-rate the market is capitalizing, not a promised return.
Preferred stock is a hybrid claim with a contractual dividend, seniority above common, and usually no (or limited) voting — debt that pretends to be equity, or the reverse.
A share buyback is the firm purchasing its own stock, shrinking share count and distributing cash without calling it a dividend.
Long high net-payout (dividends plus net buybacks) names and short low/negative payout — shareholder yield as a value/quality hybrid.
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
A dividend is a cash (or stock) distribution of residual earnings to shareholders, declared by the board and not a contractual coupon.
Dividend yield is annual dividends per share divided by price — the income run-rate the market is capitalizing, not a promised return.
Long high net-payout (dividends plus net buybacks) names and short low/negative payout — shareholder yield as a value/quality hybrid.
Preferred stock is a hybrid claim with a contractual dividend, seniority above common, and usually no (or limited) voting — debt that pretends to be equity, or the reverse.
A share buyback is the firm purchasing its own stock, shrinking share count and distributing cash without calling it a dividend.