Stochastic Optimal Control Modeling of Debt Crises

What is an optimal or a sustainable external debt - for a country, region or sector? How should one monitor and evaluate debt to preclude a crisis? We use stochastic optimal control/dynamic programming to derive an optimal debt. The deviation of the actual from the optimal will serve as a Warning Signal of a crisis. There is a correspondence between Hamilton-Jacobi-Bellman equation of Dynamic Programming and the static Mean-Variance (M-V) analysis in finance. A graphic analysis of M-V is helpful to explain the implications of DP. An explicit example is the US Agricultural debt crisis

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Year of publication:	[2021]
Authors:	Stein, Jerome L.
Publisher:	[S.l.] : SSRN
Subject:	Kontrolltheorie \| Control theory \| Stochastischer Prozess \| Stochastic process \| Internationale Staatsschulden \| International sovereign debt \| Schuldenmanagement \| Debt management

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