Many investors do not know with certainty when their portfolio will be liquidated. Should their portfolio selection be influenced by the uncertainty of exit time? In order to answer this question, we consider a suitable extension of the familiar optimal investment problem of Merton [Merton,...

We provide a concise exposition of theoretical results that appear in modeling default time as a random time, we study in details the invariance martingale property and we establish a representation theorem which leads, in a complete market setting, to the hedging portfolio of a vulnerable...

This paper is the first in a series that we devote to studying the problems of valuation and hedging of defaultable game options in general, and convertible corporate bonds in particular. Here, we present mathematical foundations for our overall study. Specifically, we provide several results...

This paper studies in some examples the role of information in a default-risk framework. We examine three types of information for a firm's unlevered asset value to the secondary bond market: the classical case of continuous and perfect information, observation of past and contemporaneous asset...

We consider the problem of maximization of expected utility from terminal wealth in a market model that is driven by a possibly not fully observable factor process and that takes explicitly into account the possibility of default for the individual assets as well as contagion (direct and...

An asset is considered whose logarithmic price is the sum of a drift term, a Brownian motion and jumps of a Poisson process. Various items of future information about the price process are considered available to an informed agent. The optimal attainable wealths of both informed and uninformed...