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Convexity and Smoothness of Scale Functions and de Finetti’s Control Problem

Research paper by Andreas E. Kyprianou, Víctor Rivero, Renming Song

Indexed on: 01 Apr '09Published on: 01 Apr '09Published in: Journal of Theoretical Probability



Abstract

We continue the recent work of Avram et al. (Ann. Appl. Probab. 17:156–180, 2007) and Loeffen (Ann. Appl. Probab., 2007) by showing that whenever the Lévy measure of a spectrally negative Lévy process has a density which is log-convex then the solution of the associated actuarial control problem of de Finetti is solved by a barrier strategy. Moreover, the level of the barrier can be identified in terms of the scale function of the underlying Lévy process. Our method appeals directly to very recent developments in the theory of potential analysis of subordinators and their application to convexity and smoothness properties of the relevant scale functions.