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Optimal Portfolios with Stochastic Interest Rates and Defaultable Assets

  • Book
  • © 2004

Overview

Authors:
  1. Holger Kraft

    1. Fraunhofer ITWM, Gottlieb-Daimler-Straße, Kaiserslautern, Germany

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Part of the book series: Lecture Notes in Economics and Mathematical Systems (LNE, volume 540)

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Table of contents (5 chapters)

  1. Front Matter

    Pages I-X
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  2. Preliminaries from Stochastics

    • Holger Kraft
    Pages 1-19

  3. Optimal Portfolios with Stochastic Interest Rates

    • Holger Kraft
    Pages 21-69

  4. Elasticity Approach to Portfolio Optimization

    • Holger Kraft
    Pages 71-98

  5. Barrier Derivatives with Curved Boundaries

    • Holger Kraft
    Pages 99-113

  6. Optimal Portfolios with Defaultable Assets — A Firm Value Approach

    • Holger Kraft
    Pages 115-163

  7. Back Matter

    Pages 165-173
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About this book

This thesis summarizes most of my recent research in the field of portfolio optimization. The main topics which I have addressed are portfolio problems with stochastic interest rates and portfolio problems with defaultable assets. The starting point for my research was the paper "A stochastic control ap­ proach to portfolio problems with stochastic interest rates" (jointly with Ralf Korn), in which we solved portfolio problems given a Vasicek term structure of the short rate. Having considered the Vasicek model, it was obvious that I should analyze portfolio problems where the interest rate dynamics are gov­ erned by other common short rate models. The relevant results are presented in Chapter 2. The second main issue concerns portfolio problems with default able assets modeled in a firm value framework. Since the assets of a firm then correspond to contingent claims on firm value, I searched for a way to easily deal with such claims in portfolio problems. For this reason, I developed the elasticity approach to portfolio optimization which is presented in Chapter 3. However, this way of tackling portfolio problems is not restricted to portfolio problems with default able assets only, but it provides a general framework allowing for a compact formulation of portfolio problems even if interest rates are stochastic.

Authors and Affiliations

  • Fraunhofer ITWM, Gottlieb-Daimler-Straße, Kaiserslautern, Germany

    Holger Kraft

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