Author:
Ankirchner Stefan,Hesse Robert,Klein Maike
Abstract
Abstract
We consider the problem of controlling the drift and diffusion rate of the endowment processes of two firms such that the joint survival probability is maximized. We assume that the endowment processes are continuous diffusions, driven by independent Brownian motions, and that the aggregate endowment is a Brownian motion with constant drift and diffusion rate. Our results reveal that the maximal joint survival probability depends only on the aggregate risk-adjusted return and on the maximal risk-adjusted return that can be implemented in each firm. Here the risk-adjusted return is understood as the drift rate divided by the squared diffusion rate.
Publisher
Cambridge University Press (CUP)
Subject
Statistics, Probability and Uncertainty,General Mathematics,Statistics and Probability
Cited by
1 articles.
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