A stochastic model for financiers

Raffaella Barone, Roy Cerqueti and Anna Grazia Quaranta ()

No 42-2007, Working Papers from Macerata University, Department of Finance and Economic Sciences

Abstract:

In this work, two models for legal and illegal financiers are presented. The aim of the financiers are different: a bank try to minimize the defalt probabilityof the funded company, while the illegal financier aims to bring the company to bankruptcy and, at the same time, to obtain the maximum level of the firm's guarantee wealth. A couple of stochastic dynamic optimization problems are solved. The illegal case let intervene a numerical analysis of the microeconomic situation of the firm, strating fromreal data and writing new simulation procedure in Matlab and GAMS. The legal case has been solved in closed-form, by using stochastic control theory.

Date: 2007-10, Revised 2008-10
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