[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bpj/maecol/v1y2014i2-4p8n1.html
   My bibliography  Save this article

Dual Optimization Problem on Defaultable Claims

Author

Listed:
  • Goutte Stéphane

    (LED – Université Paris 8, 2 rue de la Liberté, 93526 Saint-Denis Cedex, France)

  • Ngoupeyou Armand

    (Laboratoire de Probabilités et Modèles Aléatoires, CNRS, UMR 7599, Universités Paris 7 Diderot, France)

Abstract
We study the pricing and hedging problem of a claim ψ whose payoff depends on the default times of two firms A and B. Thus, regarding the possible defaults of these two firms and assuming that, in the market, we can not buy or sell any defaultable bond of the firm B but only trade defaultable bond of the firm A. Our aim is then to find the best price and hedging of ψ using only bonds of the firm A. We solve this problem using indifference pricing theory which implies to solve a system of Hamilton-Jacobi-Bellman equations. Moreover, we obtain an explicit formula of the optimal hedging strategy.

Suggested Citation

  • Goutte Stéphane & Ngoupeyou Armand, 2014. "Dual Optimization Problem on Defaultable Claims," Mathematical Economics Letters, De Gruyter, vol. 1(2-4), pages 47-54, July.
    • Handle: RePEc:bpj:maecol:v:1:y:2014:i:2-4:p:8:n:1
    DOI: 10.1515/mel-2013-0002
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/mel-2013-0002
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/mel-2013-0002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mark Davis & Sébastien Lleo, 2010. "Risk Sensitive Investment Management with Affine Processes: A Viscosity Approach," World Scientific Book Chapters, in: Masaaki Kijima & Chiaki Hara & Keiichi Tanaka & Yukio Muromachi (ed.), Recent Advances In Financial Engineering 2009, chapter 1, pages 1-41, World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abid, Ilyes & Dhaoui, Abderrazak & Goutte, Stéphane & Guesmi, Khaled, 2019. "Contagion and bond pricing: The case of the ASEAN region," Research in International Business and Finance, Elsevier, vol. 47(C), pages 371-385.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephane Goutte & Armand Ngoupeyou, 2012. "Optimization problem and mean variance hedging on defaultable claims," Papers 1209.5953, arXiv.org.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:maecol:v:1:y:2014:i:2-4:p:8:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.