Stochastic Optimal Control and the U.S. Financial Debt Crisis by Jerome L. Stein

Author:Jerome L. Stein
Language: eng
Format: epub
Publisher: Springer US, Boston, MA

(A10)

Substitute (A10) in (A7) and derive (A11), the optimal debt ratio in Model I.

(A11)

Consider β(t) as deterministic.

Model II

In Model II, the price equation is (A12). The drift is a(t) dt = π dt and the diffusion is σpdwp.

(A12)

The optimal debt ratio f*(t) is (A13). Consider β(t) as deterministic.

(A13)

References

Cheng, Ren. 2011. Fat tail genesis, power point presentation, fidelity asset allocation.

Derman, E. 2004. My life as a quant. Hoboken: Wiley.

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