Optimal stopping problems for asset management
Advances in Applied Probability
655 - 677
MetadataShow full item record
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/21337
An asset manager invests the savings of some investors in a portfolio of defaultable bonds. The manager pays the investors coupons at a constant rate and receives a management fee proportional to the value of the portfolio. He/she also has the right to walk out of the contract at any time with the net terminal value of the portfolio after payment of the investors' initial funds, and is not responsible for any deficit. To control the principal losses, investors may buy from the manager a limited protection which terminates the agreement as soon as the value of the portfolio drops below a predetermined threshold. We assume that the value of the portfolio is a jump diffusion process and find an optimal termination rule of the manager with and without protection. We also derive the indifference price of a limited protection. We illustrate the solution method on a numerical example. The motivation comes from the collateralized debt obligations. © Applied Probability Trust 2012.
Showing items related by title, author, creator and subject.
Fabretti, A.; Herzel, S.; Pinar, M.C. (2014)We examine the problem of setting optimal incentives for a portfolio manager hired by an investor who wants to induce ambiguity-robust portfolio choices with respect to estimation errors in expected returns. Adopting a ...
Bayram V.; Tansel, B.T.; Yaman H. (Elsevier Ltd, 2015)Traffic management during an evacuation and the decision of where to locate the shelters are of critical importance to the performance of an evacuation plan. From the evacuation management authority's point of view, the ...
Yilmaz O.; Kara B.Y.; Yetis U. (Academic Press, 2017)This paper presents a multi objective mixed integer location/routing model that aims to minimize transportation cost and risks for large-scale hazardous waste management systems (HWMSs). Risks induced by hazardous wastes ...