Optimal Cash Management Under Uncertainty

Bensoussan, Alain and Chutani, Anshuman and Sethi, Suresh (2009): Optimal Cash Management Under Uncertainty. Published in: Operations Research Letters , Vol. 37, No. 6 (November 2009): pp. 425-429.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cash management, Stochastic control, Maximum principle, Risky assets
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance

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