## 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 |
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Seiten (von - bis) | 1 - 28 |

Fachzeitschrift | Mathematics and Financial Economics |

Jahrgang | 4 |

Ausgabenummer | 1 |

Publikationsstatus | Veröffentlicht - 1 Mai 2010 |