Optimal feedback control of stock prices under credit risk dynamics

Stock price dynamics and option valuations under volatility feedback effect

According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price–dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect bymodeling the joint dynamics of stock price, dividends, and volatility in continuous time. Most importantly, our model pre...

Volatility Dynamics of Wavelet-filtered Stock Prices

Volatility dynamics of wavelet filtered stock price time series is studied. Using the universal thresholding method of wavelet filtering and a principle of minimal linear autocorrelation of noise component we find that the quantitative characteristics of volatility dynamics of denoised series are noticeably different from those of the raw data and the noise. Supported by the RFBR grant 06-06-80...

Optimal replenishment and credit policy in supply chain inventory model under two levels of trade credit with time- and credit-sensitive demand involving default risk

Traditional supply chain inventory modes with trade credit usually only assumed that the up-stream suppliers offered the down-stream retailers a fixed credit period. However, in practice the retailers will also provide a credit period to customers to promote the market competition. In this paper, we formulate an optimal supply chain inventory model under two levels of trade credit policy with d...

Human Capital and Optimal Policy under Risk and Credit Constraints

Optimal Investment in Credit Derivatives Portfolio under Contagion Risk

We consider the optimal portfolio problem of a power investor who wishes to allocate her wealth between several credit default swaps (CDSs), a stock index, and a money market account. We model contagion risk among the reference entities in the portfolio using a reduced form Markovian model with interacting default intensities. Using the dynamic programming principle, we establish a lattice depe...