In this paper, we analyze the impact of default risk on the portfolio decision of an investor wishing to invest in corporate bonds. Default risk is modeled via a reduced form approach and we allow for random recovery as well as joint default events. Depending on the structure of the model, we...

In this paper, we consider the asset allocation problem of an investor allocating his funds between several corporate bonds and a money market account. In particular, we provide a realistic model of financial distress: firstly, we model Chapter 7 and Chapter 11 bankruptcies as different possible...

This paper studies constrained portfolio problems that may involve constraints on the probability or the expected size of a shortfall of wealth or consumption. Our first contribution is that we solve the problems by dynamic programming, which is in contrast to the existing literature that...

In this paper a portfolio problem is considered where trading in the risky asset is stopped if a state process hits a predefined barrier. This state process need not to be perfectly correlated with the risky asset. We give a representation result for the value function and provide a verification...

Decision problems about consumption and insurance are modelled in a continuous time multistate Markovian framework. The optimal solution is derived and studied. The model, the problem, and its solution are exemplified by two special cases: In one model the individual takes optimal positions...

We deal with the introduction of life insurance and pension decisions in the personal financial problem of optimal lifetime consumption of lifetime income. We introduce in Section 2 the classical notion of reserves and present well-known differential equations characterizing these. We start with...