Tid: 5 maj 2017 kl 10.15-11.00.E34
Föredragshållare: Emil Tingström
Titel: Optimal investment with corporate tax payments (Master's thesis)
Abstract This Master's thesis examines the problem of optimal investment when corporate taxes have to be paid on capital gains. Tax payments share a lot of similarities with payoff from a call option where the underlying is the firm?s capital. How to optimally deal with this tax-option is a non-trivial problem that is complicated by the feedback between the value of the tax-option and the strategy the firm uses to handle it. For the case with only one tax payment it is possible to derive an explicit expression for the optimal strategy using a martingale method. The tax payment introduces some interesting properties to the optimal wealth process, such as a non-zero probability of ending up exactly at the tax basis at the terminal date. The optimal strategy is then generalized to the problem with multiple tax payments using the martingale framework. A numerical method of calculating the optimal strategy based on trinomial trees is also presented and implemented. This is then used to verify the theoretical results and to calculate the optimal strategy with an increasing number of tax payments. For the case with only one tax payment at a terminal date numerical results show that the increase in utility is small and a close to optimal strategy can be derived by ignoring tax. With multiple tax payments however, the increase in utility from using the tax-optimal strategy is significant.
|Sidansvarig: Filip Lindskog