In this paper, we consider a portfolio optimization problem in a defaultable market. The representative investor dynamically allocates his or her wealth among the following securities: a perpetual defaultable bond, a money market account and a default-free risky asset. The optimal investment and...

We study the cost of shocks, i.e., jump risk, with respect to reserve management when the reserve process is formulated as a drift switching jump-diffusion with a reflecting barrier at 0. Inspired by the Brownian drift switching model, our model results in a more realistic dynamic behavior of...

We develop a fixed income portfolio framework capturing the exponential decay of contagious intensities between successive default events. We show that the value function of the control problem is the classical solution to a recursive system of second-order uniformly parabolic...

We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale approach and analyze the recursive system of nonlinear...