When are dividend barriers optimal? A distributional characterization in renewal risk models
Abstract
We study the finite-horizon optimal dividend problem in a renewal risk model with unrestricted dividend payments, examining how claim-size distributions determine barrier optimality. Under general assumptions on a fixed interclaim-time distribution, we prove that exponential claims admit a globally optimal barrier for every positive safety loading, positive discount rate and finite horizon. Conversely, within the class of claim-size distributions with continuous nondecreasing hazard, every nonexponential law admits one fixed premium--discount pair for which no barrier is globally optimal at any sufficiently long horizon. These results establish, within this distribution class, an equivalence between exponentially distributed claims and the existence of a globally optimal barrier for every parameter combination in the stated range. Numerical examples compare exponential and Gamma claims with the same mean and illustrate how the claim-size distribution changes the structure of dividend decisions.
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BibTeX
@misc{miao2026when,
title = {{When are dividend barriers optimal? A distributional characterization in renewal risk models}},
author = {Linyu Miao},
howpublished = {arXiv},
year = {2026},
month = nov,
doi = {10.48550/arxiv.2611.00827},
eprint = {2611.00827},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2611.00827},
}
RIS
TY - UNPB
TI - When are dividend barriers optimal? A distributional characterization in renewal risk models
AU - Linyu Miao
PY - 2026
DA - 2026/11/01
PB - arXiv
DO - 10.48550/arxiv.2611.00827
UR - https://arxiv.org/abs/2611.00827
AB - We study the finite-horizon optimal dividend problem in a renewal risk model with unrestricted dividend payments, examining how claim-size distributions determine barrier optimality. Under general assumptions on a fixed interclaim-time distribution, we prove that exponential claims admit a globally optimal barrier for every positive safety loading, positive discount rate and finite horizon. Conversely, within the class of claim-size distributions with continuous nondecreasing hazard, every nonexponential law admits one fixed premium--discount pair for which no barrier is globally optimal at any sufficiently long horizon. These results establish, within this distribution class, an equivalence between exponentially distributed claims and the existence of a globally optimal barrier for every parameter combination in the stated range. Numerical examples compare exponential and Gamma claims with the same mean and illustrate how the claim-size distribution changes the structure of dividend decisions.
ER -