Hou, Yuanfeng; Jin, Xiangrong - Swiss Finance Institute - 2002
In this paper, we investigate how investors who face both equity risk and credit risk would optimally allocate their … market conditions in their decision making process. It also induces hedging term in this setup of otherwise deterministic … financial wealth in a dynamic continuous-time setup. We model credit risk through the defaultable zero-coupon bond and solve the …