We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale approach and analyze the recursive system of nonlinear...

We consider the optimal portfolio problem of a power investor who wishes to allocate her wealth between several credit default swaps (CDSs) and a money market account. We model contagion risk among the reference entities in the portfolio using a reduced form Markovian model with interacting...

We consider an optimal risk-sensitive portfolio allocation problem accounting for the possibility of cascading defaults. Default events have an impact on the distress state of the surviving stocks in the portfolio. We study the recursive system of non-Lipschitz quasi-linear parabolic HJB-PDEs...

In this note, we point out some errors in Section 3 of our earlier paper “Levy risk model with two-sided jumps and a barrier dividend strategy” published in Insurance: Mathematics and Economics, 50(2): 280-291, 2012. Specifically, we find that the optimal barrier does not depend on initial...

In this paper, we consider a general Levy risk model with two-sided jumps and a constant dividend barrier. We connect the ruin problem of the ex-dividend risk process with the first passage problem of the Levy process reflected at its running maximum. We prove that if the positive jumps of the...

In this paper, we introduce tractable dynamic models for financial variables (such as interest rates, foreign exchange rates, commodity prices, etc.) with capturing both jump risk and boundedness of the price fluctuation in a regulated market. For the jump risk, we use a compound Poisson process...

We develop a framework to quantify the vulnerability of mutual funds to fire-sale spillover losses. We account for the first-mover incentive that results from the mismatch between the liquidity offered to redeeming investors and the liquidity of assets held by the funds. In our framework, the...