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Stochastic Cash Management with Fixed and Proportional Transaction Costs

Author

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  • George M. Constantinides

    (Carnegie-Mellon University)

Abstract

A continuous time model of cash management is formulated with stochastic demand and allowing for positive and negative cash balances. The form of the optimal policy is assumed to be of a simple form (d, D, U, u). The parameters of the optimal policy are explicitly evaluated and the properties of the system are discussed.

Suggested Citation

  • George M. Constantinides, 1976. "Stochastic Cash Management with Fixed and Proportional Transaction Costs," Management Science, INFORMS, vol. 22(12), pages 1320-1331, August.
  • Handle: RePEc:inm:ormnsc:v:22:y:1976:i:12:p:1320-1331
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    File URL: http://dx.doi.org/10.1287/mnsc.22.12.1320
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    Cited by:

    1. Fleischmann, Moritz & Kuik, Roelof, 2003. "On optimal inventory control with independent stochastic item returns," European Journal of Operational Research, Elsevier, vol. 151(1), pages 25-37, November.
    2. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
    3. Bensoussan, Alain & Chutani, Anshuman & Sethi, Suresh, 2009. "Optimal Cash Management Under Uncertainty," MPRA Paper 19896, University Library of Munich, Germany.
    4. Khandani, Amir E. & Lo, Andrew W. & Merton, Robert C., 2013. "Systemic risk and the refinancing ratchet effect," Journal of Financial Economics, Elsevier, vol. 108(1), pages 29-45.
    5. Inderfurth, Karl & van der Laan, Erwin, 2001. "Leadtime effects and policy improvement for stochastic inventory control with remanufacturing," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 381-390, May.
    6. Neil Geismar & Milind Dawande & Divakar Rajamani & Chelliah Sriskandarajah, 2007. "Managing a Bank's Currency Inventory Under New Federal Reserve Guidelines," Manufacturing & Service Operations Management, INFORMS, vol. 9(2), pages 147-167, March.
    7. Gormley, Fionnuala M. & Meade, Nigel, 2007. "The utility of cash flow forecasts in the management of corporate cash balances," European Journal of Operational Research, Elsevier, vol. 182(2), pages 923-935, October.
    8. Pinçe, Çerag & Gürler, Ülkü & Berk, Emre, 2008. "A continuous review replenishment-disposal policy for an inventory system with autonomous supply and fixed disposal costs," European Journal of Operational Research, Elsevier, vol. 190(2), pages 421-442, October.
    9. Art Durnev & Vihang Errunza & Alexander Molchanov, 2009. "Property rights protection, corporate transparency, and growth," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1533-1562, December.
    10. Andrew W. Lo & Harry Mamaysky & Jiang Wang, 2004. "Asset Prices and Trading Volume under Fixed Transactions Costs," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1054-1090, October.
    11. Fleischmann, Moritz & Bloemhof-Ruwaard, Jacqueline M. & Dekker, Rommert & van der Laan, Erwin & van Nunen, Jo A. E. E. & Van Wassenhove, Luk N., 1997. "Quantitative models for reverse logistics: A review," European Journal of Operational Research, Elsevier, vol. 103(1), pages 1-17, November.
    12. Isohätälä, Jukka & Milne, Alistair & Robertson, Donald, 2014. "The net worth trap: investment and output dynamics in the presence of financing constraints," Research Discussion Papers 26/2014, Bank of Finland.
    13. repec:spr:annopr:v:262:y:2018:i:1:d:10.1007_s10479-016-2297-y is not listed on IDEAS

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