We develop a structural model that incorporates both macroeconomic risks and firm-specific jump risks. Using this model, we derive analytic formulas for default probability, equity price, and CDS spreads. We show that including the two types of risk in credit risk modeling can generate better...

This paper presents an entrepreneurial optimal business plan in which optimal consumption and portfolio rules, and optimal exit strategy for an entrepreneur are jointly determined in the presence of undiversifiable idiosyncratic risk. We find that the entrepreneur is more likely to exit from her...

We develop a new approach for solving the optimal retirement problem for an individual with an unhedgeable income risk. The income risk stems from a forced unemployment event, which occurs as an exponentially-distributed random shock. The optimal retirement problem is to determine the...

This paper investigates the optimal retirement of an individual in the presence of involuntary unemployment risks and borrowing constraints in a complete market with frictions. An intensity model and loading factors are used to illustrate these involuntary unemployment risks and frictions in...

In this paper we study asset demands and consumption of an individual at the end of her life cycle. We present an ideal market where complete insurance against longevity risk is available: the market consists of original assets, e.g., stocks and bonds, and annuities and life-insurance contracts...