Announcements

MATHEMATICS SEMINAR by Mete Soner

Author: COLLEGE OF SCIENCES
Time: 14:30
Location: CASE 124

KOÇ UNIVERSITY MATHEMATICS SEMINAR
*************************************
Speaker          :
Mete Soner, ETH Zurich

Title                : Mathematics of dividend payments
Date                : October 17, 2017 Tuesday
Time               : 14:30   
Cookie & Tea: 14:15 CASE 124
Place               : CASE 124

Abstract         :  In a simplified model one considers a company receiving a random cash stream.  In turn, it pays dividends to its share holders from its cash reserves.  At the same time when the cash reserves become negative it goes into bankruptcy.  The goal of the company is to maximize the expected of the discounted future dividend payments.  This problem of corporate finance can be set as an optimal control problem.  In which one needs to balance two opposing features.  Indeed, although the company wants to pay large dividends,  when too much dividends are paid then bankruptcy becomes more likely.  The famous probabilist and statistician Bruno De Finetti was the first to formulate this problem in the context of an insurance firm in 1950s.  A related problem was later considered by Avinash Dixit and Robert Pindyck in their influential book “Investments under uncertainty”.  In this talk, I will describe the problem and its solution using partial differential equations.  This work is joint with Max Reppen of ETH Zurich and Jean-Charles Rochet of Zurich and Toulouse schools of economics.