Optimal Investment Strategy under Stochastic Interest Rates

Simple item page
dc.contributor.authorMtunya, Adeline Peter
dc.contributor.authorNgare, Philip
dc.contributor.authorNkansah-Gyekye, Yaw
dc.date.accessioned2018-04-13T17:37:10Z
dc.date.available2018-04-13T17:37:10Z
dc.date.issued2017-05-19
dc.description.abstractWe study how firms’ management can make effective investment decision under the influence of random interest rates. We define the threshold interest rate value below which investment can be effectively done and above which investment is not optimal. We use a stochastic differential equation with alternating drift to find the optimal investment policy under stochastic interest rate. One of our results indicated that, the optimal condition for investment expansion is when the interest rate is low and the profit level is high. Also, there exists the threshold interest rate value which forms the basis for investment decision of a company. Moreover, we revealed that it is not optimal for the managers to plan for firm’s business expansion when is already making extremely high profits. At the end we were able to confirm that business is generally more stable when the interest rates are lower than those when they are high. Since firms in emerging economies suffer most from interest rate fluctuations, they need more effective investment strategies. Monetary policy makers of such economies need to ensure low interest rates in order to promote firms’ investment and therefore boost the general economy.en_US
dc.identifier.citationMtunya, A.P., Ngare, P. and Nkansah-Gyekye, Y. (2017) Optimal Investment Strategy under Stochastic Interest Rates. Journal of Mathematical Finance , 7, 319-332. https://doi.org/10.4236/jmf.2017.72017en_US
dc.identifier.urihttp://hdl.handle.net/20.500.11810/4679
dc.language.isoenen_US
dc.publisherJournal of Mathematical Financeen_US
dc.subjectResearch Subject Categories::MATHEMATICSen_US
dc.subjectFINANCIAL MATHEMATICSen_US
dc.subjectMATHEMATICAL MODELLINGen_US
dc.subjectSTOCHASTIC CONTROLen_US
dc.titleOptimal Investment Strategy under Stochastic Interest Ratesen_US
dc.typeJournal Articleen_US
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
JMF_2017051916222230.pdf
Size:
1.19 MB
Format:
Adobe Portable Document Format
Description:
Journal article
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Item-specific license agreed upon to submission
Description:
Download
Collections
Department of Mathematics and Informatics