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Stochastics Seminar: Khai Nguyen, NC State, Differential Game Models of Optimal Debt Management

December 4, 2023 | 2:00 pm - 3:00 pm EST

In this talk, I will present recent results on game theoretical formulation of optimal debt management problems in an infinite time horizon with exponential discount, modeled as a noncooperative interaction between a borrower and a pool of risk-neutral lenders. Here, the yearly income of the borrower is governed by a stochastic process and bankruptcy instantly occurs when the debt-to-income ratio reaches a threshold. Since the borrower may go bankrupt in finite time, the risk-neutral lenders will charge a higher interest rate in order to compensate for this possible loss of their investment. Thus, a “solution” must be understood as a Nash equilibrium, where the strategy implemented by the borrower represents the best reply to the strategy adopted by the lenders, and conversely. This leads to highly nonstandard optimization processes.


December 4, 2023
2:00 pm - 3:00 pm EST
Event Category:


SAS 4201