Optimal cash management using impulse control

DOI10.1016/J.INDAG.2023.06.008zbMATH Open1520.91447arXiv2206.04107MaRDI QIDQ6135894FDOQ6135894

Authors: Peter Lakner, Josh Reed 

Publication date: 28 August 2023

Published in: Indagationes Mathematicae. New Series (Search for Journal in Brave)

Abstract: We consider the impulse control of Levy processes under the infinite horizon, discounted cost criterion. Our motivating example is the cash management problem in which a controller is charged a fixed plus proportional cost for adding to or withdrawing from his/her reserve, plus an opportunity cost for keeping any cash on hand. Our main result is to provide a verification theorem for the optimality of control band policies in this scenario. We also analyze the transient and steady-state behavior of the controlled process under control band policies and explicitly solve for the optimal policy in the case in which the Levy process to be controlled is the sum of a Brownian motion with drift and a compound Poisson process with exponentially distributed jump sizes.

Full work available at URL: https://arxiv.org/abs/2206.04107

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zbMATH Keywords

Brownian motionimpulse controlcash management problemLévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Actuarial science and mathematical finance (91G99) Impulsive control/observation systems (93C27)

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Cited In (6)

• Optimal impulse control for cash management with quadratic holding-penalty costs
• Title not available (Why is that?)
• Optimal cash management under uncertainty
• Title not available (Why is that?)
• A generalized impulse control model of cash management
• Optimal impulse control for a multidimensional cash management system with generalized cost functions

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