{"ID":2848582,"CreatedAt":"2026-06-01T04:54:23.091178241Z","UpdatedAt":"2026-06-01T04:54:23.091178241Z","DeletedAt":null,"paper_url":"https://arxiv.org/abs/2510.25494","arxiv_id":"2510.25494","title":"Stochastic Control of Dividends with a Drawdown Penalty","abstract":"We consider a diffusion risk model where dividends are paid at rate $U(t) \\in [0, u_0]$. We are interested in maximising the dividend payments under a drawdown constraint, that is, we penalise a drawdown size larger than a level $d \u003e 0$. We show that the optimal dividend rate $U(t)$ is either zero or the maximal rate $u_0$ and determine the optimal strategy. Moreover, we derive an explicit expression for the value function by solving a system of differential equations.","short_abstract":"We consider a diffusion risk model where dividends are paid at rate $U(t) \\in [0, u_0]$. We are interested in maximising the dividend payments under a drawdown constraint, that is, we penalise a drawdown size larger than a level $d \u003e 0$. We show that the optimal dividend rate $U(t)$ is either zero or the maximal rate $...","url_abs":"https://arxiv.org/abs/2510.25494","url_pdf":"https://arxiv.org/pdf/2510.25494v2","authors":"[\"Kira Dudziak\",\"Hanspeter Schmidli\"]","published":"2025-10-29T13:14:23Z","proceeding":"math.OC","tasks":"[\"math.OC\"]","methods":"[\"Diffusion Model\"]","has_code":false}