Showing 1 - 10 of 25
What is an optimal or a sustainable external debt - for a country, region or sector? How should one monitor and evaluate debt to preclude a crisis? We use stochastic optimal control/dynamic programming to derive an optimal debt. The deviation of the actual from the optimal will serve as a...
Persistent link: https://www.econbiz.de/10011509487
Banks should evaluate whether a borrower is likely to default. The author applies several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities...
Persistent link: https://www.econbiz.de/10010299187
Creditors, banks and bank regulators should evaluate whether a borrower is likely to default. I apply several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset...
Persistent link: https://www.econbiz.de/10010299829
Banks should evaluate whether a borrower is likely to default. I apply several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities sides. The...
Persistent link: https://www.econbiz.de/10010264305
A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...
Persistent link: https://www.econbiz.de/10010266065
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...
Persistent link: https://www.econbiz.de/10010315187
We use stochastic optimal control-dynamic programming (DP) to derive the optimal foreign debt/net worth, consumption/net worth, current account/net worth, and endogenous growth rate in an open economy. Unlike the literature that uses an Intertemporal Budget Constraint (IBC) or the Maximum...
Persistent link: https://www.econbiz.de/10010315325
What is an optimal or a sustainable external debt - for a country, region or sector? How should one monitor and evaluate debt to preclude a crisis? We use stochastic optimal control/dynamic programming to derive an optimal debt. The deviation of the actual from the optimal will serve as a...
Persistent link: https://www.econbiz.de/10010315962
In July 1997, the economies of East Asia became embroiled in one of the worst financial crises of the postwar period. Yet, prior to the crisis, these economies were seen as models of economic growth experiencing sustained growth rates that exceeded those earlier thought unattainable. Why did the...
Persistent link: https://www.econbiz.de/10010315998
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...
Persistent link: https://www.econbiz.de/10011398652