We formulate a computationally tractable extension of the classical Merton optimal consumptioninvestment problem to include the capital gains taxes. This is the continuous-time version of the model introduced by Dammon, Spatt, and Zhang [Rev. Financ. Stud., 14 (2001), pp. 583–616]. In this model the tax basis is computed as the average cost of the stocks in the investor’s portfolio. This averag...

We give explicit solutions for utility optimization problems in the presence of Knightian uncertainty in continuous time. We solve the robust optimization problem explicitly both when the investor’s utility is of CRRA and of CARA type. We show that our problem formulation allows us to apply Sion’s min max theorem and to solve the dual problem explicitly. Mathematics Subject Classification: 91B2...

In this research, we conduct specification analysis of structural credit risk models with stochastic volatility using term structure Credit Default Swap (CDS) spreads and equity form high-frequency return data. We also test five representatives samples 93 single name CDS contracts from January 2010 -2022. The model consider are; the standard Merton(1974) model, Black & Cox (1976) flat barri...

Recent research at the Bank has been aimed at quantifying the risk of default by individual companies. There are a number of separate ways in which this can be assessed. First, by informal judgement based on company visits and accounting information. Second, by formal quantitative analysis of accounting information and other disclosures. Third, by formal quantitative analysis of market-based in...