Herein, we develop a backward stochastic differential equation (BSDE) valuation of securities with default risk. Consequently, the optimal recovery problem with quasi-linear utility functions is discussed with the help of the stochastic maximum principle. Finally, two important examples: the exponential and power utility cases are studied and their business implications are considered.
@article{bwmeta1.element.bwnjournal-article-doi-10_4064-am33-3-6,
author = {Jianhui Huang and Na Li},
title = {Valuation and optimal design to defaultable security},
journal = {Applicationes Mathematicae},
volume = {33},
year = {2006},
pages = {305-321},
zbl = {1134.49021},
language = {en},
url = {http://dml.mathdoc.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am33-3-6}
}
Jianhui Huang; Na Li. Valuation and optimal design to defaultable security. Applicationes Mathematicae, Tome 33 (2006) pp. 305-321. http://gdmltest.u-ga.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am33-3-6/