Related papers: Dynamic loan portfolio management in a three time …
In this article, we consider the problem of a bank's loan portfolio in the context of liquidity risk, while allowing for the limited liability protection enjoyed by the bank. Accordingly, we construct a novel loan portfolio model with…
Debt recycling is an aggressive equity extraction strategy that potentially permits faster repayment of a mortgage. While equity progressively builds up as the mortgage is repaid monthly, mortgage holders may obtain another loan they could…
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…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We present a novel approach for the bank's decision problem, incorporating Limited Liability in the objective function. Accordingly, we consider continuous time models, with and without Limited Liability. We compare the solutions of these…
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 build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and…
This paper examines the dividend and investment policies of a cash constrained firm that has access to costly external funding. We depart from the literature by allowing the firm to issue collateralized debt to increase its investment in…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
We develop a dynamic multi-agent model of an interbank payment system where banks choose their level of available funds on the basis of private payoff maximisation. The model consists of the repetition of a simultaneous move stage game with…
In this paper, we analyze dynamic programming as a novel approach to solve the problem of maximizing the profits of a bank. The mathematical model of the problem and the description of a bank's work is described in this paper. The problem…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
We consider a financial intermediary managing assets and liabilities exposed to several risk sources and seeking an optimal portfolio strategy to minimise the initial capital invested and the total risk associated with investment losses and…
In this paper, we develop the theory of functional generation of portfolios in an equity market with changing dimension. By introducing dimensional jumps in the market, as well as jumps in stock capitalization between the dimensional jumps,…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Complex non-linear interactions between banks and assets we model by two time-dependent Erd\H{o}s Renyi network models where each node, representing bank, can invest either to a single asset (model I) or multiple assets (model II). We use…
In this work we will develop a new approach to solve the non repayment problem in microfinance due to the problem of asymmetric information. This approach is based on modeling and simulation of ordinary differential systems where time…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…