Logo

US Financial Debt Crisis: A Stochastic Optimal Control Approach

Small book cover: US Financial Debt Crisis: A Stochastic Optimal Control Approach

US Financial Debt Crisis: A Stochastic Optimal Control Approach
by

Publisher: Springer
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

Book cover: Dynamic Economics: Theoretical and Statistical Studies of Demand, Production and PricesDynamic Economics: Theoretical and Statistical Studies of Demand, Production and Prices
by - Principia Press
Contents: Static Versus Dynamic Economics; Demand for Consumer Goods; Automotive Demand for Gasoline; Demand for Agricultural Products; Demand for Capital Goods; Factors Influencing Residential Building; Growth and Decline of Industry; etc.
(9892 views)
Book cover: Optimal Regulation: The Economic Theory of Natural MonopolyOptimal Regulation: The Economic Theory of Natural Monopoly
by - The MIT Press
Optimal Regulation addresses the central issue of regulatory economics -- how to regulate firms in a way that induces them to produce and price 'optimally'. It synthesis an extensive theoretical literature on what constitutes optimality.
(11117 views)
Book cover: Urban Travel Demand: A Behavioral AnalysisUrban Travel Demand: A Behavioral Analysis
by - North-Holland Publishing
'Urban Travel Demand' develops a theory of demand for populations of individual economic consumers which we believe is a logical and natural generalization of traditional theory to encompass choice among discrete alternatives.
(14422 views)
Book cover: EconometricsEconometrics
by - University of Wisconsin
Econometrics is the study of estimation and inference for economic models using economic data. Econometric theory concerns the study of tools and methods for applied econometric applications. This is a first-year Ph.D. econometrics textbook.
(16408 views)