Optimal dividend for an Ornstein Uhlenbeck surplus

Abstract

We consider an insurance company whose surplus follows an Ornstein-Uhlenbeck(OU) process driven by a standard Brownian motion. The company pays dividends to its shareholders and seeks to maximise the expected value of the future discounted dividends. Late dividend payments are penalised not only through the usual discounting, but through an additional exponential factor. We find the optimal strategy for the case of mean-reverting and non-mean-reverting OU processes and illustrate out findings by a numerical example.