Equity value, bankruptcy, and optimal dividend policy with finite maturity -- variational inequality approach with discontinuous coefficient

DOI10.1186/S13660-015-0588-5MaRDI QIDQ2262007zbMATH OpenOpenAlexWikidataFDO

Authors Xiaoru Han, Fahuai Yi

Publication date 16 March 2015

Published in Journal of Inequalities and Applications (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1186/s13660-015-0588-5

zbMATH Keywords

equity valuefinite horizonoptimal bankruptcy boundaryoptimal dividend policy

Mathematics Subject Classification ID

Free boundary problems for PDEs (35R35) Variational and other types of inequalities involving nonlinear operators (general) (47J20) Applications of stochastic analysis (to PDEs, etc.) (60H30) Corporate finance (dividends, real options, etc.) (91G50) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Review text

The authors develop a continuous-time model for the finite horizon corporate equity, provide a theoretical analysis of the behaviors of the optimal bankruptcy boundary, and obtain the optimal dividend policy. The model is formulated as a parabolic variational inequality.

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Cites work

• Continuous-time stochastic control and optimization with financial applications
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Cited in

(3)

• Debt-equity swap with finite time horizon -- variational inequality approach
• Market frictions and corporate finance: an overview paper
• Optimal dividends and bankruptcy procedures: Analysis of the Ornstein-Uhlenbeck process

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