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Optimal investment with counterparty risk: a default-density model approach

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  • Ying Jiao
  • Huyên Pham

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  • Ying Jiao & Huyên Pham, 2011. "Optimal investment with counterparty risk: a default-density model approach," Finance and Stochastics, Springer, vol. 15(4), pages 725-753, December.
    • Handle: RePEc:spr:finsto:v:15:y:2011:i:4:p:725-753
    DOI: 10.1007/s00780-010-0140-x
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    References listed on IDEAS

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    1. Ronnie Sircar & Thaleia Zariphopoulou, 2010. "Utility valuation of multi-name credit derivatives and application to CDOs," Quantitative Finance, Taylor & Francis Journals, vol. 10(2), pages 195-208.
    2. Blanchet-Scalliet, Christophette & El Karoui, Nicole & Jeanblanc, Monique & Martellini, Lionel, 2008. "Optimal investment decisions when time-horizon is uncertain," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1100-1113, December.
    3. Damiano Brigo & Agostino Capponi, 2008. "Bilateral counterparty risk valuation with stochastic dynamical models and application to Credit Default Swaps," Papers 0812.3705, arXiv.org, revised Nov 2009.
    4. Robert A. Jarrow & Fan Yu, 2008. "Counterparty Risk and the Pricing of Defaultable Securities," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 20, pages 481-515, World Scientific Publishing Co. Pte. Ltd..
    5. Bruno Bouchard & Huyên Pham, 2004. "Wealth-path dependent utility maximization in incomplete markets," Finance and Stochastics, Springer, vol. 8(4), pages 579-603, November.
    6. Jeanblanc, Monique & Le Cam, Yann, 2009. "Progressive enlargement of filtrations with initial times," Stochastic Processes and their Applications, Elsevier, vol. 119(8), pages 2523-2543, August.
    7. repec:dau:papers:123456789/1803 is not listed on IDEAS
    8. El Karoui, Nicole & Jeanblanc, Monique & Jiao, Ying, 2010. "What happens after a default: The conditional density approach," Stochastic Processes and their Applications, Elsevier, vol. 120(7), pages 1011-1032, July.
    9. Dufresne, Pierre Collin & Hugonnier, Julien, 2007. "Pricing and hedging in the presence of extraneous risks," Stochastic Processes and their Applications, Elsevier, vol. 117(6), pages 742-765, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Agostino Capponi & José Figueroa-López & Andrea Pascucci, 2015. "Dynamic credit investment in partially observed markets," Finance and Stochastics, Springer, vol. 19(4), pages 891-939, October.
    2. Jingtang Ma & Dongya Deng & Harry Zheng, 2014. "A robust algorithm and convergence analysis for static replications of nonlinear payoffs," Papers 1406.5430, arXiv.org.
    3. Jos'e A. Salmer'on & Giulia Di Nunno & Bernardo D'Auria, 2022. "Before and after default: information and optimal portfolio via anticipating calculus," Papers 2208.07163, arXiv.org, revised May 2023.
    4. Bogdan Iftimie & Monique Jeanblanc & Thomas Lim & Hai-Nam Nguyen, 2013. "Optimization problem under change of regime of interest rate," Papers 1305.7309, arXiv.org.
    5. Zhu, Huiming & Deng, Chao & Yue, Shengjie & Deng, Yingchun, 2015. "Optimal reinsurance and investment problem for an insurer with counterparty risk," Insurance: Mathematics and Economics, Elsevier, vol. 61(C), pages 242-254.
    6. Yuanrong Wang & Tomaso Aste, 2021. "Dynamic Portfolio Optimization with Inverse Covariance Clustering," Papers 2112.15499, arXiv.org, revised Jan 2022.
    7. Caroline Hillairet & Ying Jiao, 2015. "Portfolio optimization with insider’s initial information and counterparty risk," Finance and Stochastics, Springer, vol. 19(1), pages 109-134, January.
    8. Idris Kharroubi & Thomas Lim, 2014. "Progressive Enlargement of Filtrations and Backward Stochastic Differential Equations with Jumps," Journal of Theoretical Probability, Springer, vol. 27(3), pages 683-724, September.
    9. Kim, Jinbeom & Leung, Tim, 2016. "Pricing derivatives with counterparty risk and collateralization: A fixed point approach," European Journal of Operational Research, Elsevier, vol. 249(2), pages 525-539.
    10. Longjie Jia & Martijn Pistorius & Harry Zheng, 2017. "Dynamic Portfolio Optimization with Looping Contagion Risk," Papers 1710.05168, arXiv.org, revised Aug 2018.
    11. Wang, Yuanrong & Aste, Tomaso, 2023. "Dynamic portfolio optimization with inverse covariance clustering," LSE Research Online Documents on Economics 117701, London School of Economics and Political Science, LSE Library.
    12. Lijun Bo & Agostino Capponi, 2017. "Optimal Credit Investment with Borrowing Costs," Mathematics of Operations Research, INFORMS, vol. 42(2), pages 546-575, May.
    13. Salmerón Garrido, José Antonio & Nunno, Giulia Di & D'Auria, Bernardo, 2022. "Before and after default: information and optimal portfolio via anticipating calculus," DES - Working Papers. Statistics and Econometrics. WS 35411, Universidad Carlos III de Madrid. Departamento de Estadística.
    14. Martin Herdegen & Sebastian Herrmann, 2017. "Strict Local Martingales and Optimal Investment in a Black-Scholes Model with a Bubble," Papers 1711.06679, arXiv.org.
    15. Giovanni W. Puopolo, 2015. "Portfolio Selection with Transaction Costs and Default Risk," CSEF Working Papers 414, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    16. Tetsuya Ishikawa & Scott Robertson, 2017. "Optimal Investment and Pricing in the Presence of Defaults," Papers 1703.00062, arXiv.org.
    17. Alexander Melnikov & Amir Nosrati, 2015. "Efficient Hedging For Defaultable Securities And Its Application To Equity-Linked Life Insurance Contracts," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(07), pages 1-28, November.
    18. Jingnan Wang & Ralf Korn, 2020. "Numerical Algorithms for Reflected Anticipated Backward Stochastic Differential Equations with Two Obstacles and Default Risk," Risks, MDPI, vol. 8(3), pages 1-30, July.
    19. Elhiwi, Majdi, 2014. "Default barrier intensity model for credit risk evaluation," Statistics & Probability Letters, Elsevier, vol. 95(C), pages 125-131.

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    More about this item

    Keywords

    Counterparty risk; Contagious loss or gain; Density of default time; Optimal investment; Duality; Dynamic programming; Backward stochastic differential equation (BSDE); 60J75; 91B28; 93E20; G01; G11;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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