A KIND OF TIME-INCONSISTENT CORPORATE INTERNATIONAL INVESTMENT PROBLEM WITH DISCONTINUOUS CASH FLOW

In this paper, we study a kind of time-inconsistent corporate international investment problem with discontinuous cash flow in consideration of the exchange risk, information costs and taxes. The time-inconsistency arises from the presence of investment risk in the cost functional. We first define the time-consistent equilibrium strategy for this problem and establish a sufficient condition for it through a flow of forward-backward stochastic differential equations with random jumps. When all market parameters are deterministic, an equilibrium strategy is given explicitly by solutions of several ordinary differential equations. Moreover, we present some numerical examples to discuss the influence of market parameters on the equilibrium strategy. It is confirmed that the information costs provide a useful explanation for home bias puzzle in international finance by our time-inconsistent model.