Related papers: A Debt Management Problem with Currency Devaluatio…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
The debts' clearing problem is about clearing all the debts in a group of n entities (persons, companies etc.) using a minimal number of money transaction operations. The problem is known to be NP-hard in the strong sense. As for many…
We study financial networks where banks are connected by debt contracts. We consider the operation of debt swapping when two creditor banks decide to exchange an incoming payment obligation, thus leading to a locally different network…
We model incentive security in non-custodial stablecoins and derive conditions for participation in a stablecoin system across risk absorbers (vaults/CDPs) and holders of governance tokens. We apply option pricing theory to derive closed…
The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
Corporate insolvency can have a devastating effect on the economy. With an increasing number of companies making expansion overseas to capitalize on foreign resources, a multinational corporate bankruptcy can disrupt the world's financial…
This article examines how emerging economies use countercyclical monetary policies to manage economic crises and fluctuations in dominant currencies, such as the US dollar and the euro. Global economic cycles are marked by phases of…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
The paper models foreign capital inflow from the developed to the developing countries in a stochastic dynamic programming (SDP) framework. Under some regularity conditions, the existence of the solutions to the SDP problem is proved and…
We describe the bailout of banks by governments as a Markov Decision Process (MDP) where the actions are equity investments. The underlying dynamics is derived from the network of financial institutions linked by mutual exposures, and the…
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable…
This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the…
State government operations comprise a large number of transactions for different processes that must be carried out across the state. This comprises new projects, maintenance and repairs, public employee compensation, and agricultural…
In this work, we investigate a biased dollar exchange model with collective debt limit, in which agents picked at random (with a rate depending on the amount of dollars they have) give at random time a dollar to another agent being picked…
This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of…
We develop a complete analysis of a general entry-exit-scrapping model. In particular, we consider an investment project that operates within a random environment and yields a payoff rate that is a function of a stochastic economic…
Technical Debt is a term begat by Ward Cunningham to signify the measure of adjust required to put a software into that state which it ought to have had from the earliest starting point. Often organizations need to support continuous and…
Funding is a cost to trading desks that they see as an input. Current FVA-related literature reflects this by also taking funding costs as an input, usually constant, and always risk-neutral. However, this funding curve is the output from a…