We develop a mean field model of interbanking borrowing and lending activities. Each bank borrows from or lends to other counterparties at an idiosyncratic rate, and is exposed to sudden shocks affecting the level of its monetary reserves. Using weak convergence analysis, we provide an explicit...

We develop a fixed income portfolio framework capturing the exponential decay of contagious intensities between successive default events. We show that the value function of the control problem is the classical solution to a recursive system of second-order uniformly parabolic...

We introduce a dynamic credit portfolio framework where optimal investment strategies are robust against misspecifications of the reference credit model. The risk-averse investor models his fear of credit risk misspecification by considering a set of plausible alternatives whose expected log...

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...