Optimal Dividend Barrier in the Classical Risk Model Perturbed by Diffusion

Xitong Song, Yanan Wang

Abstract: In this paper we consider a diffusion perturbed classical compound Poisson risk model in the presence of a constant dividend barrier. An integro-differential equation with certain boundary conditions of the discounted dividend payments prior to ruin is derived and solved. We also consider few particular examples to offer optimal dividend barrier.

Keywords: Compound Poisson process, Diffusion Process, Discounted dividend payments, Integro-differential equation