Optimal Cash Management under Uncertainty
Operations Research Letters, Vol. 37, pp. 425-429, 2009
15 Pages Posted: 28 Feb 2009 Last revised: 27 Mar 2014
Date Written: February 26, 2009
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
JEL Classification: C61, G11, M21, M11
Suggested Citation: Suggested Citation