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Optimal rates from eigenvalues

Author

Listed:
  • Carr, Peter
  • Worah, Pratik

Abstract

A financial portfolio typically pays dividend based on its value. We show that there is a unique portfolio that pays the maximum dividend rate while remaining solvent, under appropriate assumptions. We also give a characterization of both the portfolio and the optimal dividend rate.

Suggested Citation

  • Carr, Peter & Worah, Pratik, 2016. "Optimal rates from eigenvalues," Finance Research Letters, Elsevier, vol. 16(C), pages 230-238.
    • Handle: RePEc:eee:finlet:v:16:y:2016:i:c:p:230-238
    DOI: 10.1016/j.frl.2015.12.003
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    References listed on IDEAS

    as
    1. Lars Peter Hansen & José A. Scheinkman, 2009. "Long-Term Risk: An Operator Approach," Econometrica, Econometric Society, vol. 77(1), pages 177-234, January.
    2. Radner, Roy & Shepp, Larry, 1996. "Risk vs. profit potential: A model for corporate strategy," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1373-1393, August.
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    Keywords

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    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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