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

See all articles by Alain Bensoussan

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management; Hong Kong Polytechnic University - Faculty of Business; Ajou University

Anshuman Chutani

University of Texas at Dallas - Naveen Jindal School of Management

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: February 26, 2009

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

JEL Classification: C61, G11, M21, M11

Suggested Citation

Bensoussan, Alain and Chutani, Anshuman and Sethi, Suresh, Optimal Cash Management under Uncertainty (February 26, 2009). Operations Research Letters, Vol. 37, pp. 425-429, 2009. Available at SSRN: https://ssrn.com/abstract=1350528

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Rd
SM 30
Richardson, TX 75080-3021
United States
9728836117 (Phone)

HOME PAGE: http://www.utdallas.edu/~axb046100/

Hong Kong Polytechnic University - Faculty of Business

Dept SEEM
Systems Engr * Engr Mgmt
Hong Kong, Hong Kong
China

Ajou University ( email )

Ajou
France

Anshuman Chutani

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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