Optimal Cash Management Under Uncertainty

Alain Bensoussan, Anshuman Chutani and Suresh Sethi

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Cash management; Stochastic control; Maximum principle; Risky assets (search for similar items in EconPapers)
JEL-codes: C02 C61 D14 D92 E22 G31 (search for similar items in EconPapers)
Date: 2009-02-25
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Citations: View citations in EconPapers (10)

Published in Operations Research Letters 6.37(2009): pp. 425-429

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