On the optimality of double barrier strategies for Lévy processes

Abstract: This paper studies de Finetti's optimal dividend problem with capital injection. We confirm the optimality of a double barrier strategy when the underlying risk model follows a L\'evy process that may have positive and negative jumps. The main result in this paper is a generalization of Theorem 3 in Avram et al.(2007), which is the spectrally negative case, and Theorem 3.1 in Bayraktar et al.(2013), which is the spectrally positive case. In contrast with the spectrally one-sided cases, double barrier strategies cannot be handled by using scale functions to obtain some properties of the expected net present values (NPVs) of dividends and capital injections. Instead, to obtain these properties, we observe changes in the sample path (and the associated NPV) when there is a slight change to the initial value or the barrier value.