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Optimal risk-exposure management with costly refinancing opportunities


Barth, Andrea; Moreno, Santiago (2013). Optimal risk-exposure management with costly refinancing opportunities. NCCR FINRISK Working Paper Series 858, University of Zurich.

Abstract

In this paper the decisions of a firm's manager, in terms of exposure to a profitable but risky technology, distribution of dividends and (costly) re-injection of cash to ward off bankruptcy are studied. The analysis of the manager's optimal choices is done via a value function whose state variable is the firm's current level of reserves. Contingent on whether proportional or fixed costs of reinvestment are considered, singular stochastic control or stochastic impulse control techniques are used.

Abstract

In this paper the decisions of a firm's manager, in terms of exposure to a profitable but risky technology, distribution of dividends and (costly) re-injection of cash to ward off bankruptcy are studied. The analysis of the manager's optimal choices is done via a value function whose state variable is the firm's current level of reserves. Contingent on whether proportional or fixed costs of reinvestment are considered, singular stochastic control or stochastic impulse control techniques are used.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 July 2013
Deposited On:03 Mar 2014 08:04
Last Modified:05 Apr 2016 17:44
Series Name:NCCR FINRISK Working Paper Series
Number of Pages:27
Official URL:http://www.zora.uzh.ch/93703/
Related URLs:http://www.nccr-finrisk.uzh.ch/wps.php?action=query&id=858
Other Identification Number:merlin-id:9227

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