Optimal Securitization of Credit Portfolios via Impulse Control

Rüdiger Frey, Roland Seydel

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung


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.
Seiten (von - bis)1 - 28
FachzeitschriftMathematics and Financial Economics
PublikationsstatusVeröffentlicht - 1 Mai 2010