Stochastic optimization approach of car value depreciation

Authors


  • This work was supported by Kuwait University research grant no. SM01/11.

Correspondence to: Bader Alshamary, Department of Mathematics, Faculty of Science, Kuwait University, PO Box 5969, Safat 13060, Kuwait.

E-mail: bader231@sci.kuniv.edu.kw

Abstract

This paper presents a stochastic model for a car's value and its depreciation under random repairs modeled by a Poisson process; the usage functional is defined, and the optimal selling time is estimated. Exact or approximative formulas are provided where possible. The car's value is evaluated as an asset with negative return and paying random normally distributed dividends at stochastic times, which are Erlang distributed. Copyright © 2012 John Wiley & Sons, Ltd.

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