Optimality of a barrier strategy in a spectrally negative L\'evy model with a level-dependent intensity of bankruptcy

Abstract

We consider de Finetti's stochastic control problem for a spectrally negative L\'evy process in an Omega model. In such a model, the (controlled) process is allowed to spend time under the critical level but is then subject to a level-dependent intensity of bankruptcy. First, before considering the control problem, we derive some analytical properties of the corresponding Omega scale functions. Second, we prove that exists a barrier strategy that is optimal for this control problem under a mild assumption on the L\'evy measure. Finally, we analyse numerically the impact of the bankruptcy rate function on the optimal strategy.