Stochastic Optimal Control and the U.S. Financial Debt Crisis

• Main Author: Stein, Jerome L. (Author)
• Corporate Author: SpringerLink (Online service)
• Format: Electronic eBook
• Language: English
• Published: Boston, MA : Springer US, 2012.
• Subjects: Finance.; Probabilities.; Statistics.; Finance, general.; Probability Theory and Stochastic Processes.; Statistics for Business/Economics/Mathematical Finance/Insurance.

Stochastic Optimal Control (SOC)—a mathematical theory concerned with minimizing a cost (or maximizing a payout) pertaining to a controlled dynamic process under uncertainty—has proven incredibly helpful to understanding and predicting debt crises and evaluating proposed financial regulation and ris...

Table of Contents:

• Introduction/preface
• Failure of the Fed, IMF, academic profession to anticipate the crisis, disregarded warnings
• Failure of the Quants, mathematical finance models
• Philosophy of Stochastic optimal control approach, relation to M-V analysis; Sensitivity of optimal debt and risk to alternative stochastic processes, Early Warning Signals
• Application of Stochastic Optimal Control to Financial crisis 2007-08
• AIG in the crisis
• Crises in the 1980s: Agricultural, S&L
• Diversity of debt crises in Euro. .