The study re-examines bond valuation and default risk, by considering and relaxing assumptions regarding integer rating migration, and portfolio rating migration, and consequently the implied degree of diversification. A reduced form model, based on (a) rating migration (matrix), serve as basis...

A dynamic model featuring a stochastic technology frontier shows significant impact of technology adoption for asset prices. In equilibrium, firms operating with old capital are riskier because costly technology adoption restricts their flexibilities in upgrading to the latest technology, making...

In this paper we study the stochastic area swept by a regular time-homogeneous diffusion till a stopping time. This unifies some recent literature in this area. Through stochastic time change we establish a link between the stochastic area and the stopping time of another associated...

The method of variational inequalities is a useful theoretical tool in stochastic control, but there are few problems in which this method leads to an explicit solution. We present such a problem drawn from portfolio management. An agent can distribute his wealth between two investments, one...

The allocation of research and development (R&D) funds across a portfolio of programs must simultaneously consider uncertainty from research outcomes and from market acceptance of the resulting technologies. We introduce a stochastic R&D portfolio management framework for addressing both sources...

In this paper, a continuous-time, structural model of a dealer-bank is presented to derive fair value equations for credit-risky financial products that are not perfectly hedged. The impact these contracts have on the dealer-bank's earnings volatility, and consequently, their solvency and...

The study reexamines bond valuation and default risk by considering and relaxing assumptions regarding integer rating migration and portfolio rating migration, and consequently the implied degree of diversification. A reduced form model, based on (a) rating migration (matrix) serves as the basis...