|
|
|
|
||||
|
||||
Stochastic Optimal Control Modeling of Debt CrisesJerome L. SteinBrown University - Division of Applied Mathematics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) September 2003 CESifo Working Paper Series No. 1043 Abstract: What is an optimal or a sustainable external debt - for a country, region or sector? How should one monitor and evaluate debt to preclude a crisis? We use stochastic optimal control/dynamic programming to derive an optimal debt. The deviation of the actual from the optimal will serve as a Warning Signal of a crisis. There is a correspondence between Hamilton-Jacobi-Bellman equation of Dynamic Programming and the static Mean-Variance (M-V) analysis in finance. A graphic analysis of M-V is helpful to explain the implications of DP. An explicit example is the US Agricultural debt crisis.
Number of Pages in PDF File: 23 Keywords: stochastic optimal control, debt, international finance, US agricultural crisis, Mean-Variance analysis, Hamilton-Jacobi-Bellaman equation JEL Classification: C61, D81, D9, F34 working papers seriesDate posted: November 10, 2003Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo5 in 0.828 seconds
