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Financing policies via stochastic control: a dynamic programming approach

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Abstract

This paper deals with a theoretical stochastic dynamic optimization model for the external financing of firms. We aim at searching for the best intensity of payment that a financier has to apply to a company in order to have a loan repaid. The techniques involved are related to the optimal control theory with exit time. We follow a dynamic programming approach. Our model also presents a distinction between the legal and the illegal financier, and a theoretical comparison analysis of the results is presented. Some numerical examples provide further validation of the theoretical results.

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  1. Department of Economic and Financial Institutions, University of Macerata, Via Crescimbeni, 20, 62100, Macerata, Italy

    Roy Cerqueti

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  1. Roy Cerqueti
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Cerqueti, R. Financing policies via stochastic control: a dynamic programming approach. J Glob Optim 53, 539–561 (2012). https://doi.org/10.1007/s10898-011-9725-y

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