Related papers: Optimal Liquidation in a Defaultable Market
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…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
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…
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…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
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,…
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…
We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian…
We study a single risky financial asset model subject to price impact and transaction cost over an finite time horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
We consider an insurance company modelling its surplus process by a Brownian motion with drift. Our target is to maximise the expected exponential utility of discounted dividend payments, given that the dividend rates are bounded by some…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
In this paper we propose and solve an optimal dividend problem with capital injections over a finite time horizon. The surplus dynamics obeys a linearly controlled drifted Brownian motion that is reflected at the origin, dividends give rise…
Management of a portfolio that includes an illiquid asset is an important problem of modern mathematical finance. One of the ways to model illiquidity among others is to build an optimization problem and assume that one of the assets in a…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
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…
In this paper, we study two optimisation settings for an insurance company, under the constraint that the terminal surplus at a deterministic and finite time $T$ follows a normal distribution with a given mean and a given variance. In both…
We study optimal liquidation in the presence of linear temporary and transient price impact along with taking into account a general price predicting finite-variation signal. We formulate this problem as minimization of a cost-risk…
Mathematically, the execution of an American-style financial derivative is commonly reduced to solving an optimal stopping problem. Breaking the general assumption that the knowledge of the holder is restricted to the price history of the…