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Linear programming selection of internal financial laws and a knapsack problem

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Abstract:

We formulate and solve explicitly a linear programming problem that arises from the problem of choosing an internal financial law of a given financial project such that the associated discount vector maximizes a linear objective function. If the original problem has optimal solutions, then it is equivalent to a knapsack problem. We obtain its basic optimal solutions in closed form. After considering the special case of nonnegative preference directions, we also obtain a new characterization of the existence of internal financial laws.

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Authors and Affiliations

  1. Dipartimento di Matematica Applicata “B. de Finetti”, Università di Trieste, Piazzale Europa 1, 34127 Trieste, Italy. E-mail: antonellab@econ.univ.trieste.it, , , , , , IT

    A. Basso

  2. Dipartimento di Matematica Pura ed Applicata, Università di Padova, Via Belzoni 7, 35131 Padova, Italy. E-mail: viscolani@math.unipd.it, , , , , , IT

    B. Viscolani

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  1. A. Basso
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  2. B. Viscolani
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Received: October 1997 / Accepted: October 1999

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Basso, A., Viscolani, B. Linear programming selection of internal financial laws and a knapsack problem. CALCOLO 37, 47–57 (2000). https://doi.org/10.1007/s100920050003

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  • DOI: https://doi.org/10.1007/s100920050003

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