Related papers: Optimal Taxation with Endogenous Default under Inc…
I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
In this paper, we present a simple microeconomic model with linear continuous-time dynamics that describes a production-inventory system with debt repayment. This model is formulated in terms of optimal control and its exact solutions are…
We consider a scenario where a system experiences a disruption, and the states (representing health values) of its components continue to reduce over time, unless they are acted upon by a controller. Given this dynamical setting, we…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
The origin of economic crises is a key problem for economics. We present a model of long-run competitive markets to show that the multiplicity of behaviors in an economic system, over a long time scale, emerge as statistical regularities…
We consider the problem faced by a central bank which bails out distressed financial institutions that pose systemic risk to the banking sector. In a structural default model with mutual obligations, the central agent seeks to inject a…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
In dynamical framework the conflict between government and the central bank according to the exchange Rate of payment of fixed rates and fixed rates of fixed income (EMU) convergence criteria such that the public debt / GDP ratio The method…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default…
A direct method for calculating default rates by industry and target corporate segments is not possible given the lack of statistical data. The proposed paper considers a model for filtering the dynamics of the probability of default of…
Financial networks are characterized by complex structures of mutual obligations. These obligations are fulfilled entirely or in part (when defaults occur) via a mechanism called clearing, which determines a set of payments that settle the…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
We study optimal liquidation of a trading position (so-called block order or meta-order) in a market with a linear temporary price impact (Kyle, 1985). We endogenize the pressure to liquidate by introducing a downward drift in the…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
The analogies between economics and classical mechanics can be extended from constrained optimization to constrained dynamics by formalizing economic (constraint) forces and economic power in analogy to physical (constraint) forces in…
We present a minimal agent-based model of interacting agents characterized by their wealth to study taxation and inequality in a non-conservative economy. Wealth evolves through an extremal stochastic replacement process in which the…
An important issue within the present economic crisis is understanding the dynamics of the public debt of a given country, and how the behavior of average consumers and tax payers in that country affects it. Starting from a model of the…
We provide a theoretical framework to examine how carbon pricing policies influence inflation and to estimate the policy-driven impact on goods prices from achieving net-zero emissions. Firms control emissions by adjusting production,…
We propose a model in which dividend payments occur at regular, deterministic intervals in an otherwise continuous model. This contrasts traditional models where either the payment of continuous dividends is controlled or the dynamics are…