Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Optimal investment with counterparty risk: a default-density modeling
  approach   We consider a financial market with a stock exposed to a counterparty risk
inducing a drop in the price, and which can still be traded after this default
time. We use a default-density modeling approach, and address in this
incomplete market context the expected utility maximization from terminal
wealth. We show how this problem can be suitably decomposed in two optimization
problems in complete market framework: an after-default utility maximization
and a global before-default optimization problem involving the former one.
These two optimization problems are solved explicitly, respectively by duality
and dynamic programming approaches, and provide a fine understanding of the
optimal strategy. We give some numerical results illustrating the impact of
counterparty risk and the loss given default on optimal trading strategies, in
particular with respect to the Merton portfolio selection problem.

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The categories of this paper are: atom-ph
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The categories of this paper are: q-bio
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The categories of this paper are: mtrl-th
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The categories of this paper are: ao-sci
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The categories of this paper are: funct-an
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The categories of this paper are: quant-ph
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The categories of this paper are: hep-ph
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The categories of this paper are: econ
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The categories of this paper are: chao-dyn
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The categories of this paper are: dg-ga
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The categories of this paper are: hep-ex
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The categories of this paper are: chem-ph
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The categories of this paper are: patt-sol
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The categories of this paper are: comp-gas
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The categories of this paper are: cond-mat
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The categories of this paper are: nucl-th