Abstract
This paper presents a general model of cash management, viewed as an impulse control problem for a stochastic money flow process. Generalizing classical approaches, we represent this process by a superposition of a Brownian motion and a compound Poisson process, controlled by two-sided target-trigger policies. For phase-type distributions for the upward and downward jumps we determine all pertinent cost functionals explicitly. Moreover, the controlled process is studied in steady state. The closed-form results can be used to determine optimal values for the target and trigger values numerically.
| Original language | English |
|---|---|
| Pages (from-to) | 1013-1033 |
| Number of pages | 21 |
| Journal | Journal of Economic Dynamics and Control |
| Volume | 28 |
| Issue number | 6 |
| DOIs | |
| State | Published - Mar 2004 |
Keywords
- Brownian motion
- Cash management
- Compound Poisson process
- Cost functionals
- Optional sampling
- Superposition
- Target-trigger control
ASJC Scopus subject areas
- Economics and Econometrics
- Control and Optimization
- Applied Mathematics