A Stochastic Model of Optimal Debt Management and Bankruptcy
| Autor: | Bressan, Alberto, Marigonda, Antonio, Nguyen, Khai T., Palladino, Michele |
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| Rok vydání: | 2016 |
| Předmět: | |
| Druh dokumentu: | Working Paper |
| Popis: | A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process. When the debt-to-income ratio $x(t)$ reaches a given size $x^*$, bankruptcy instantly occurs. The interest rate charged by the risk-neutral lenders is precisely determined in order to compensate for this possible loss of their investment. For a given bankruptcy threshold $x^*$, existence and properties of optimal feedback strategies for the borrower are studied, in a stochastic framework as well as in a limit deterministic setting. The paper also analyzes how the expected total cost to the borrower changes, depending on different values of $x^*$, changes, depending on different values of $x^*$?. Comment: 29 pages, 3 figures |
| Databáze: | arXiv |
| Externí odkaz: |
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