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Note--The Stochastic Cash Balance Problem with Charges Levied Against the Balance

Author

Listed:
  • Evan L. Porteus

    (Stanford University)

  • Edwin H. Neave

    (Northwestern University and Queen's University)

Abstract

The finite horizon cash balance problem with charges levied against the cash balance is considered. Conditions, sufficient to show that a two-sided (s, S) policy is optimal, are given. We consider transactions cost functions which include no fixed costs, and are linear in the amount of change. Only a reinterpretation of an earlier formulation is required when transactions costs are levied against the balance. When penalty charges are so levied, we require the penalty cost function to be convex, non-negative, and include no charge on a zero ending balance.

Suggested Citation

  • Evan L. Porteus & Edwin H. Neave, 1972. "Note--The Stochastic Cash Balance Problem with Charges Levied Against the Balance," Management Science, INFORMS, vol. 18(11), pages 600-602, July.
    • Handle: RePEc:inm:ormnsc:v:18:y:1972:i:11:p:600-602
    DOI: 10.1287/mnsc.18.11.600
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    Cited by:

    1. Jianjun Xu & Mustafa Cagri Gürbüz & Youyi Feng & Shaoxiang Chen, 2020. "Optimal Spot Trading Integrated with Quantity Flexibility Contracts," Production and Operations Management, Production and Operations Management Society, vol. 29(6), pages 1532-1549, June.

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