CPDO with finite termination: maximal return under cash-in and cash-out conditions

Xiaoli Yang, Jin Liang, Yuan Wu


The maximal return and optimal leverage of a constant proportion debt obligation with finite termination and two boundaries are analysed by numerically solving Hamilton–Jacobi–Bellman equations. We discuss the probabilities of the asset value reaching the upper or lower bound under the optimal control and the optimal control problem with a time-varying boundary. Furthermore, we also analyse the relationship between the optimal return, the optimal policy and different parameters.



CPDO; HJB equation; cash-in; cash-out; optimal leverage

DOI: http://dx.doi.org/10.21914/anziamj.v57i0.8911

Remember, for most actions you have to record/upload into this online system
and then inform the editor/author via clicking on an email icon or Completion button.
ANZIAM Journal, ISSN 1446-8735, copyright Australian Mathematical Society.