Quotation Frey, Rüdiger, Seydel, Roland. 2010. Optimal Securitization of Credit Portfolios via Impulse Control. Mathematics and Financial Economics 4 (1): 1-28.


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Abstract

We study the optimal loan securitization policy of a commercial bank which is mainly engaged in lending activities. For this we propose a stylized dynamic model which contains the main features affecting the securitization decision. In line with reality we assume that there are non-negligible fixed and variable transaction costs associated with each securitization. The fixed transaction costs lead to a formulation of the optimization problem in an impulse control framework. We prove viscosity solution existence and uniqueness for the quasi-variational inequality associated with this impulse control problem. Iterated optimal stopping is used to find a numerical solution of this PDE, and numerical examples are discussed.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Mathematics and Financial Economics
Citation Index SCI
WU-Journal-Rating new FIN-A, VW-D
Language English
Title Optimal Securitization of Credit Portfolios via Impulse Control
Volume 4
Number 1
Year 2010
Page from 1
Page to 28
URL http://www.math.uni-leipzig.de/~frey/impulse-credit-frey-seydel.pdf

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People
Frey, Rüdiger (Details)
External
Seydel, Roland
Organization
Institute for Statistics and Mathematics IN (Details)
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