Published: Dec. 13, 2018

A Stochastic Model of Optimal Debt Management and Bankruptcy

 

We consider a problem of optimal debt management which is modeled as a non-cooperative game between a borrower and a pool of risk-neutral lenders. Since the debtor may go bankrupt, lenders charge a higher interest rate to offset the possible loss of part of their investment. In this talk, I will present results on existence and properties of optimal strategies, both in a deterministic and in a stochastic framework.