In this paper, we study an optimal excess-of-loss reinsurance and investment problem for an insurer in defaultable market. The insurer can buy reinsurance and invest in the following securities: a bank account, a risky asset with stochastic volatility and a defaultable corporate bond. We discuss the optimal investment strategy into two subproblems: a pre-default case and a post-default case. We...

We consider the optimal investment-consumption problem with an unknown distribution for the investment returns. After taking the Bayesian approach, the problem is formulated as a Markov decision process in a nonparametric context. We discuss the existence of the optimal strategy and derive the closed form solution of the optimal portfolio. When the prior distribution is a Dirichlet process, the...

This paper examines the interaction between investment and financing decisions of a firm using a real options approach. The firm is endowed with a perpetual option to invest in a project at any time by incurring an irreversible investment cost at that instant. The amount of the irreversible investment cost is directly related to the intensity of investment that is endogenously chosen by the fir...

In this paper we examine an optimal investment policy of the firm, which is financed by issuing equity and debt during a period of time, using real options framework. We examine the effects of the maturity of investment on the values of equity, debt, firm, tax shield and bankruptcy cost. Specifically, we show that the investment timing depends not only on the investment threshold but also on th...

We study an optimization problem of an investor in which there is a better investment opportunity when he is rich than when he is poor. We model the betterment of the investment opportunity by considering an exogenously specified wealth threshold such that the investor’s investment opportunity is better when his wealth is above the threshold than when it is below the threshold. We derive a clos...

The fact that derivative securities are equivalent to specific dynamic trading strategies in complete markets suggests the possibility of constructing buy-and-hold portfolios of options that mimic certain dynamic investment policies, e.g. asset-allocation rules. We explore this possibility by solving the following problem: given an optimal dynamic investment policy, find a set of options at the...

Cooperative investment consists of two problems: finding an optimal cooperative investment strategy and fairly dividing investment outcome among participating agents. In general, the two problems cannot be solved separately. It is known that when agents’ preferences are represented by mean-deviation functionals, sharing of optimal portfolio creates instruments that, on the one hand, satisfy ind...

economic development plans normally contain some policy objectives, especially for the most important macroeconomic variables. governments are expected to take best policies to achieve these objectives, although due to some structural or other impediments they may fail to touch the objectives. we have attempted to uncover the determinants of private consumption and investment as the objectives ...

When environmental conditions vary stochastically, individuals accrue fitness benefits by exhibiting phenotypic plasticity. Here we analyze a general dynamic-programming model describing an individual's optimal energy allocation in a stochastic environment. After maturation, individuals repeatedly decide how to allocate incoming energy between reproduction and maintenance. We analyze the optima...

This paper proposes a real options model for evaluating the biomass power generation investment in China. The uncertainties in the market price of electricity, CO2 price and straw price are considered. Meanwhile the dynamic relationship between installed capacity and fuel cost, as well as the long-term reduction of subsidy are described. Two scenarios, i.e., with the carbon emission trading sch...