Related papers: Equilibrium Defaultable Corporate Debt and Investm…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
We consider an economy made of competing firms which are heterogeneous in their capital and use several inputs for producing goods. Their consumption policy is fixed rationally by maximizing a utility and their capital cannot fall below a…
We theorize the financial health of a company and the risk of its default. A company is financially healthy as long as its equilibrium in the financial system is maintained, which depends on the cost attributable to the probability that…
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…
In this paper, we take up the analysis of a principal/agent model with moral hazard introduced in [17], with optimal contracting between competitive investors and an impatient bank monitoring a pool of long-term loans subject to Markovian…
We study the conditions under which input-output networks can dynamically attain a competitive equilibrium, where markets clear and profits are zero. We endow a classical firm network model with minimal dynamical rules that reduce…
Modelling all possible life cycles of a company in a highly competitive economic environment gives a significant advantage to the owner in his business investment activities. This article proposes and analyses a dynamic model of a company's…
Because the asset value of a private company does not observable except in quarterly reports, the structural model has not been developed for a private company. For this reason, this paper attempt to develop the Merton's structural model…
We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism.…
This paper studies a discrete-time version of the Lucas-Uzawa endogenous growth model with physical and human capital in the presence of externalities. Existence of an optimal equilibrium is proved using tools from dynamic programming with…
In this paper, we consider the robust optimal reinsurance investment problem of the insurer under the $\alpha$-maxmin mean-variance criterion in the defaultable market. The financial market consists of risk-free bonds, a stock and a…
We formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…
We establish existence, uniqueness and regularity of solution results for a class of backward stochastic partial differential equations with singular terminal condition. The equation describes the value function of non-Markovian stochastic…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
The paper is concerned with a variant of the continuous-time finite state Markov game of control and stopping where both players can affect transition rates, while only one player can choose a stopping time. We use the dynamic programming…
This article is the starting point of a series of works whose aim is the study of deterministic control problems where the dynamic and the running cost can be completely different in two (or more) complementary domains of the space $\R^N$.…
In this paper we consider a broad class of infinite horizon discrete-time optimal control models that involve a nonnegative cost function and an affine mapping in their dynamic programming equation. They include as special cases classical…
We investigate the portfolio execution problem under a framework in which volatility and liquidity are both uncertain. In our model, we assume that a multidimensional Markovian stochastic factor drives both of them. Moreover, we model…
The paper studies a system of Hamilton-Jacobi equations, arising from a stochastic optimal debt management problem in an infinite time horizon with exponential discount, modeled as a noncooperative interaction between a borrower and a pool…