Abstract
We study the optimal loan securitization policy of a commercial bank which is
mainly engaged in lending activities. For this we propose a stylized dynamic model
which contains the main features affecting the securitization decision. In line with
reality we assume that there are non-negligible fixed and variable transaction costs
associated with each securitization. The fixed transaction costs lead to a formulation
of the optimization problem in an impulse control framework. We prove viscosity
solution existence and uniqueness for the quasi-variational inequality associated with
this impulse control problem. Iterated optimal stopping is used to find a numerical
solution of this PDE, and numerical examples are discussed.
mainly engaged in lending activities. For this we propose a stylized dynamic model
which contains the main features affecting the securitization decision. In line with
reality we assume that there are non-negligible fixed and variable transaction costs
associated with each securitization. The fixed transaction costs lead to a formulation
of the optimization problem in an impulse control framework. We prove viscosity
solution existence and uniqueness for the quasi-variational inequality associated with
this impulse control problem. Iterated optimal stopping is used to find a numerical
solution of this PDE, and numerical examples are discussed.
| Originalsprache | Englisch |
|---|---|
| Seiten (von - bis) | 1 - 28 |
| Fachzeitschrift | Mathematics and Financial Economics |
| Jahrgang | 4 |
| Ausgabenummer | 1 |
| Publikationsstatus | Veröffentlicht - 1 Mai 2010 |