
Optimal Liquidity management and Hedging in the presence of a non-predictable investment opportunity
Villeneuve, Stéphane; Warin, Xavier (2014), Optimal Liquidity management and Hedging in the presence of a non-predictable investment opportunity, Mathematics and Financial Economics, 8, 2, p. 193-227. http://dx.doi.org/10.1007/s11579-013-0110-0
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Type
Article accepté pour publication ou publiéDate
2014Nom de la revue
Mathematics and Financial EconomicsVolume
8Numéro
2Éditeur
Springer
Pages
193-227
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In this paper, we develop a dynamic model that captures the interaction between a firm’s cash reserves, the risk management policy and the profitability of a non-predictable irreversible investment opportunity. We consider a firm that has assets in place generating a stochastic cash-flow stream. The firm has a non-predictable growth opportunity to expand its operation size by paying a sunk cost. When the opportunity is available, the firm can finance it either by cash or by costly equity issuance. We provide an explicit characterization of the firm strategy in terms of investment, hedging, equity issuance and dividend distribution.Mots-clés
Liquidity management; Singular control problem; One-dimensional free boundary problem; Maximum principlePublications associées
Affichage des éléments liés par titre et auteur.
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Bonjean, Isabelle; Platteau, Jean-Philippe; Verardi, Vicenzo (2016) Document de travail / Working paper
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Bonjean, Isabelle; Platteau, Jean-Philippe; Verardi, Vicenzo (2017) Rapport
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Villeneuve, Bertrand; Durand-Viel, Laure (2011) Document de travail / Working paper
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Durand-Viel, Laure; Villeneuve, Bertrand (2015) Article accepté pour publication ou publié
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Johan, Sofia; Najar, Dorra (2011) Communication / Conférence