Optimal cash holding model based on minimization of ruin probability
The management of optimal cash holding is particularly important for the sustainability of enterprises’ survival and business decision-making. It is not good for enterprises to have more or less cash holding. In the meantime, the probability of enterprise bankruptcy is also one of the most important...
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| Format: | Article |
| Language: | English |
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Miskolc University Press
2024-01-01
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| Series: | Miskolc Mathematical Notes |
| Online Access: | http://mat76.mat.uni-miskolc.hu/mnotes/article/4372 |
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| author | Zhengyan Wang Yan Zhang Peibiao Zhao |
| author_facet | Zhengyan Wang Yan Zhang Peibiao Zhao |
| author_sort | Zhengyan Wang |
| collection | DOAJ |
| description | The management of optimal cash holding is particularly important for the sustainability of enterprises’ survival and business decision-making. It is not good for enterprises to have more or less cash holding. In the meantime, the probability of enterprise bankruptcy is also one of the most important research topics in the field of economic finance and management science, such as the early warning of investment risk and financial decision support. In this paper, an optimal cash holding model is established. It is assumed that the objective of optimal cash holding is to minimize the probability of bankruptcy and the security area of cash holding is the constraint condition. By using the dynamic stochastic programming method, the optimal conversion strategy and the analytic expressions of the value function are obtained, and the relevant economic explanations and numerical examples are given. The effects of capital market parameters and consumption function parameters on the optimal conversion strategy and optimal cash holding are discussed. |
| format | Article |
| id | doaj-art-97603be3f5d14a1eb8c72f98536a716f |
| institution | Kabale University |
| issn | 1787-2405 1787-2413 |
| language | English |
| publishDate | 2024-01-01 |
| publisher | Miskolc University Press |
| record_format | Article |
| series | Miskolc Mathematical Notes |
| spelling | doaj-art-97603be3f5d14a1eb8c72f98536a716f2025-01-21T12:00:07ZengMiskolc University PressMiskolc Mathematical Notes1787-24051787-24132024-01-01252104310.18514/MMN.2024.4372Optimal cash holding model based on minimization of ruin probabilityZhengyan WangYan ZhangPeibiao ZhaoThe management of optimal cash holding is particularly important for the sustainability of enterprises’ survival and business decision-making. It is not good for enterprises to have more or less cash holding. In the meantime, the probability of enterprise bankruptcy is also one of the most important research topics in the field of economic finance and management science, such as the early warning of investment risk and financial decision support. In this paper, an optimal cash holding model is established. It is assumed that the objective of optimal cash holding is to minimize the probability of bankruptcy and the security area of cash holding is the constraint condition. By using the dynamic stochastic programming method, the optimal conversion strategy and the analytic expressions of the value function are obtained, and the relevant economic explanations and numerical examples are given. The effects of capital market parameters and consumption function parameters on the optimal conversion strategy and optimal cash holding are discussed.http://mat76.mat.uni-miskolc.hu/mnotes/article/4372 |
| spellingShingle | Zhengyan Wang Yan Zhang Peibiao Zhao Optimal cash holding model based on minimization of ruin probability Miskolc Mathematical Notes |
| title | Optimal cash holding model based on minimization of ruin probability |
| title_full | Optimal cash holding model based on minimization of ruin probability |
| title_fullStr | Optimal cash holding model based on minimization of ruin probability |
| title_full_unstemmed | Optimal cash holding model based on minimization of ruin probability |
| title_short | Optimal cash holding model based on minimization of ruin probability |
| title_sort | optimal cash holding model based on minimization of ruin probability |
| url | http://mat76.mat.uni-miskolc.hu/mnotes/article/4372 |
| work_keys_str_mv | AT zhengyanwang optimalcashholdingmodelbasedonminimizationofruinprobability AT yanzhang optimalcashholdingmodelbasedonminimizationofruinprobability AT peibiaozhao optimalcashholdingmodelbasedonminimizationofruinprobability |