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Contribution Details

Type Working Paper
Scope Contributions to practice
Title Optimal risk-exposure management with costly refinancing opportunities
Organization Unit
  • Andrea Barth
  • Santiago Moreno-Bromberg
  • English
Institution University of Zurich
Series Name NCCR FINRISK Working Paper Series
Number 858
Number of Pages 27
Date 2013
Abstract Text In this paper the decisions of a firm's manager, in terms of exposure to a profitable but risky technology, distribution of dividends and (costly) re-injection of cash to ward off bankruptcy are studied. The analysis of the manager's optimal choices is done via a value function whose state variable is the firm's current level of reserves. Contingent on whether proportional or fixed costs of reinvestment are considered, singular stochastic control or stochastic impulse control techniques are used.
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