IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2607.10542.html

optimal credit portfolio and consumption with regime switching and default contagion

Author

Listed:
  • Fei Sun
  • Wenyuan Wang
  • Kaixin Yan

Abstract

We study optimal portfolio and consumption in a regime-switching multi-name credit market with default contagion. Defaults generate portfolio losses and alter the intensities of surviving securities. Under Cobb--Douglas utility, homogeneity reduces the HJB equation to a recursive ODE system indexed by the default states. Solving it backward from the all-default state, we establish existence and uniqueness of positive classical solutions, characterize the optimal feedback controls, and prove a verification theorem.

Suggested Citation

  • Fei Sun & Wenyuan Wang & Kaixin Yan, 2026. "optimal credit portfolio and consumption with regime switching and default contagion," Papers 2607.10542, arXiv.org.
    • Handle: RePEc:arx:papers:2607.10542
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2607.10542
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    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:arx:papers:2607.10542. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    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.