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Title: Corporate valuation and optimal operation under liquidity constraints
Author: Cheng, Mingliang
ISNI:       0000 0004 6497 746X
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2016
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We investigate the impact of cash reserves upon the optimal behaviour of a modelled firm that has uncertain future revenues. To achieve this, we build up a corporate financing model of a firm from a Real Options foundation, with the option to close as a core business decision maintained throughout. We model the firm by employing an optimal stochastic control mathematical approach, which is based upon a partial differential equations perspective. In so doing, we are able to assess the incremental impacts upon the optimal operation of the cash constrained firm, by sequentially including: an optimal dividend distribution; optimal equity financing; and optimal debt financing (conducted in a novel equilibrium setting between firm and creditor). We present efficient numerical schemes to solve these models, which are generally built from the Projected Successive Over Relaxation (PSOR) method, and the Semi-Lagrangian approach. Using these numerical tools, and our gained economic insights, we then allow the firm the option to also expand the operation, so they may also take advantage of favourable economic conditions.
Supervisor: Evatt, Geoffrey ; Johnson, Paul Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Semi-Lagrangian Methods ; Optimal Dividends ; Stochastic Control ; Optimal Investment ; Debt Financing ; Real Options ; Corporate Finance