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Optimal Cash Management Under Uncertainty

Authors
Publication Date
Keywords
  • G31 - Capital Budgeting
  • Fixed Investment And Inventory Studies
  • Capacity
  • E22 - Capital
  • Investment
  • Capacity
  • C02 - Mathematical Methods
  • C61 - Optimization Techniques
  • Programming Models
  • Dynamic Analysis
  • D92 - Intertemporal Firm Choice And Growth
  • Financing
  • Investment
  • And Capacity
  • D14 - Personal Finance
Disciplines
  • Mathematics

Abstract

We solve an agent's optimization problem of meeting demands for cash over time with cash deposited in bank or invested in stock. The stock pays dividends and uncertain capital gains, and a commission is incurred in buying and selling of stock. We use a stochastic maximum principle to obtain explicitly the optimal transaction policy.

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