The sinking fund problem : optimal timing of bond purchases Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/m613n208f

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  • A sinking fund payment must be made each year to retire a bond issue. Instead of paying cash, the corporation will typically surrender bonds that it has purchased on the open market. The sinking fund problem is to determine an optimal strategy in the form of a stopping rule to decide between purchasing bonds now, or waiting for at least one more day. The problem is formulated and solved for two objective functions: (1) minimize expected unit cost, and (2) minimize maximum regret. Price movements are assumed to follow a conditional random walk. Using computer simulation, the performance and stopping characteristics of the two models are compared against a dollar averaging purchase strategy commonly used in practice. Both models outperform dollar averaging under most simulated conditions. A case study using actual price data is also developed to demonstrate the approach.
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  • description.provenance : Submitted by Kevin Martin (martikev@onid.orst.edu) on 2013-09-19T18:27:40Z No. of bitstreams: 1 McVicarRobertWJr1979.pdf: 2296221 bytes, checksum: 3d97bc769690c6edeb61b7d4aad37244 (MD5)
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