Abstract
An investment timing problem which takes into account both taxation (including tax exemptions) and financing by credit is considered. This problem is reduced to the optimal stopping of a two-dimensional diffusion process. We give the solution to the investment timing problem as a function of parameters of the model, in particular, of the tax holiday duration and interest rate for borrowing. We study the question whether the higher interest rate for borrowing can be compensated by tax holidays.
Mathematics Subject Classification (2010): 60G40, 91B38, 91B70
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Acknowledgements
The work is supported by Russian Foundation for Basic Researches (projects 11-06-00109, 10-01-00767) and Russian Foundation for Humanities (project 10-02-00271).
We are especially grateful to an anonymous referee for helpful comments and suggestions which helped us to improve the paper.
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Arkin, V., Slastnikov, A. (2013). A Mathematical Model of Investment Incentives. In: Shiryaev, A., Varadhan, S., Presman, E. (eds) Prokhorov and Contemporary Probability Theory. Springer Proceedings in Mathematics & Statistics, vol 33. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33549-5_2
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DOI: https://doi.org/10.1007/978-3-642-33549-5_2
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