On Steady Dividend Payment under Functional Mean Reversion Speed

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dc.contributor.authorMtunya, Adeline Peter
dc.contributor.authorNgare, Philip
dc.contributor.authorNkansah-Gyekye, Yaw
dc.date.accessioned2018-04-13T17:28:09Z
dc.date.available2018-04-13T17:28:09Z
dc.date.issued2016-08
dc.description.abstractWe study how firms’ management can ensure steady dividend growth and payout to the shareholders in an emerging market. We create the dividend equalization reserve account whereby during high profit some amount of money is kept in order to top up dividends during deficiency. We use a mean reversion stochastic differential equation with a functional mean reversion speed to find the optimal dividend policy with optimal dividend equalization reserve. One of our results indicates that, it is optimal to pay high dividends when we have high mean levels. Also, we realized that a higher level of volatility which implies more dividend can be paid. And high dividend can also be paid as the interest rate rises but this is more significant when the firm makes profits above average. Lastly, we compared the buffer approach to a situation where hedging was not applied and found that the buffering approach is more suitable because it gives shareholders steady dividend payments.en_US
dc.identifier.citationMtunya, A.P., Ngare, P. and Nkansah-Gyekye, Y. (2016) On Steady Dividend Payment under Functional Mean Reversion Speed. Journal of Mathematical Finance, 6, 368-377. http://dx.doi.org/10.4236/jmf.2016.63030en_US
dc.identifier.urihttp://hdl.handle.net/20.500.11810/4678
dc.language.isoenen_US
dc.publisherJournal of Mathematical Financeen_US
dc.subjectResearch Subject Categories::MATHEMATICSen_US
dc.subjectFINANCIAL MATHEMATICSen_US
dc.subjectSTOCHASTIC CONTROLen_US
dc.titleOn Steady Dividend Payment under Functional Mean Reversion Speeden_US
dc.typeJournal Articleen_US
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