We provide benchmarks to evaluate what is an optimal foreign debt and a maximal foreign debt (debt-max), when risk is explicitly considered. When the actual debt exceeds debt-max, then the economy will default when a bad shock occurs. This paper is an application of the stochastic optimal...

This paper proposes and solves an optimal dividend problem in which a two-state regimeswitching environment affects the dynamics of the company's cash surplus and, as a novel feature, also the bankruptcy level. The aim is to maximize the total expected profits from dividends until bankruptcy....

The present paper is devoted to the study of a bank salvage model with a finite time horizon that is subjected to stochastic impulse controls. In our model, the bank’s default time is a completely inaccessible random quantity generating its own filtration, then reflecting the unpredictability...

The objective of this research was to demonstrate the (nonlinear) risks of sovereign insolvency and explore the applicability of stochastic modeling in public debt management, given a structural economic model of stochastic government debt dynamics. A stochastic optimal control model was...