Dividend corridors and a ruin constraint

Abstract

We propose a new class of dividend payment strategies for which one can easily control an infinite-time-horizon ruin probability constraint for an insurance company. When the risk process evolves as a spectrally negative Lévy process, we investigate analytical properties of these strategies and propose two numerical methods for finding explicit expressions for the optimal parameters. Numerical experiments show that the performance of these strategies is outstanding and, in some cases, even comparable to the overall-unconstrained optimal dividend strategy to maximize expected aggregate discounted dividend payments, despite the ruin constraint.