Related papers: Equilibrium Defaultable Corporate Debt and Investm…
We consider an optimal control problem for a linear stochastic integro-diffe\-rential equation with conic constraints on the phase variable and the control of singular-regular type. Our setting includes consumption-investment problems for…
This paper characterizes differentiable and subgame Markov perfect equilibria in a continuous time intertemporal decision problem with non-constant discounting. Capturing the idea of non commitment by letting the commitment period being…
We provide easily verifiable conditions for the well-posedness of the optimal investment problem for a behavioral investor in an incomplete discrete-time multiperiod financial market model, for the first time in the literature. Under two…
We develop a tractable macroeconomic model that captures dynamic behaviors across multiple timescales, including business cycles. The model is anchored in a dynamic capital demand framework reflecting an interactions-based process whereby…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
This paper proposes and studies an optimal dividend problem in which a two-state regime-switching environment affects the dynamics of the company's cash surplus and, as a novel feature, also the bankruptcy level. The aim is to maximize the…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We study Markov decision problems where the agent does not know the transition probability function mapping current states and actions to future states. The agent has a prior belief over a set of possible transition functions and updates…
In this paper we propose a new way of proving the value of a firm that is currently producing a certain product and faces the option to exit the market. The problem of optimal exiting is an optimal stopping problem, that can be solved using…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…
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…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
In this paper, we study the optimal capital structure model with endogenous bankruptcy when the firm's asset value follows an exponential L\'evy process with positive jumps. In the Leland-Toft framework \cite{LelandToft96}, we obtain the…
This paper studies a dynamic optimal reinsurance and dividend-payout problem for an insurance company in a finite time horizon. The goal of the company is to maximize the expected cumulative discounted dividend payouts until bankruptcy or…
This paper extends the classical dividend problem by incorporating a novel, path-dependent mechanism of firm default. In the traditional framework, ruin occurs when the surplus process first reaches zero. In contrast, default in our model…
This paper is concerned with the uniqueness issue of open-loop equilibrium investment strategies of dynamic mean-variance portfolio selection problems with random coefficients. A unified method is developed to treat both the problems with…
We investigate discrete-time mean-variance portfolio selection problems viewed as a Markov decision process. We transform the problems into a new model with deterministic transition function for which the Bellman optimality equation holds.…