US Financial Debt Crisis: A Stochastic Optimal Control Approach
by Jerome Stein
Publisher: Springer 2012
ISBN/ASIN: 146143078X
ISBN-13: 9781461430780
Number of pages: 34
Description:
Stochastic Optimal Control (SOC) is very helpful in understanding and predicting debt crises. The mathematical analysis is applied empirically to the financial debt crisis of 2008, the crises of the 1980s and concludes with an analysis of the European debt crisis. I use SOC to derive a theoretically founded quantitative measure of an optimal, and an excessive leverage/ debt/ risk that increases the probability of a crisis. The optimal leverage balances risk against expected growth. The environment is stochastic: the capital gain, productivity of capital and interest rate are stochastic variables, and for an insurance company, such as AIG, the claims are also stochastic. I associate the housing price bubble with the growth of household debt. A bubble is dangerous insofar as it induces a non-sustainable debt. This danger is exacerbated insofar as a complex financial system is based upon it.
Download or read it online for free here:
Download link
(430KB, PDF)
Similar books
Non-Extensive Entropy Econometrics for Low Frequency Seriesby Second Bwanakare - De Gruyter Open
The book provides a new, non-extensive entropy econometrics approach to the economic modelling of ill-behaved inverse problems. Particular attention is paid to national account-based general equilibrium models known for their relative complexity.
(7444 views)
Structural Analysis of Discrete Data with Econometric Applicationsby Charles F. Manski, Daniel McFadden - The MIT Press
The book provides a methodological foundation for the analysis of economic problems involving discrete data, and charts the current frontiers of this subject. It is also useful for the researchers involved in the structural analysis of discrete data.
(17545 views)
The Computation of Economic Equilibriaby Herbert Scarf - Yale University Press
Contents: Problem of Computing Equilibrium Prices; Determination of an Approximate Fixed Point of Continuous Mapping; Numerical Applications of Brouwer's Theorem; An Extension of the Algorithm; Computation of Equilibria in a General Walrasian Model.
(11677 views)
Lectures in Quantitative Economicsby Thomas J. Sargent, John Stachurski - QuantEcon
This website presents a series of lectures on quantitative economic modeling. From the table of contents: Data and Empirics; Tools and Techniques; Dynamic Programming; Multiple Agent Models; Time Series Models; Dynamic Programming Squared.
(10338 views)