On The Application of the Laplace Transform to Certain Economic Problems

Abstract

During the last thirty years, the method of the Laplace transform has found an increasing number of applications in the fields of physics and technology. In this article the author points out the possibility of solving problems in the area of discounting with the aid of this method. Without any loss of general validity, it is shown that a discount factor can always be written in an exponential manner which implies that the present value of a cash-flow will obtain a very simple form in the Laplace terminology. This simplicity holds good for stochastic as well as for deterministic economic processes, and the results mentioned below should, therefore, be of immediate use when applied, e.g., to investment problems.

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