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dc.contributor.advisorPetersen, Mark A.
dc.contributor.advisorMukuddem-Petersen, Janine
dc.contributor.advisorMulaudzi, Mmboniseni P.
dc.contributor.authorDe Waal, Bernadine
dc.date.accessioned2011-08-19T14:13:10Z
dc.date.available2011-08-19T14:13:10Z
dc.date.issued2010
dc.identifier.urihttp://hdl.handle.net/10394/4396
dc.descriptionThesis (M.Sc. (Applied Mathematics))--North-West University, Potchefstroom Campus, 2011.
dc.description.abstractThe subprime mortgage crisis (SMC) is an ongoing housing and nancial crisis that was triggered by a marked increase in mortgage delinquencies and foreclosures in the U.S. It has had major adverse consequences for banks and nancial markets around the globe since it became apparent in 2007. In our research, we examine an originator's (OR's) nonlinear stochastic optimal control problem related to choices regarding deposit inflow rates and marketable securities allocation. Here, the primary aim is to minimize liquidity risk, more speci cally, funding and credit crunch risk. In this regard, we consider two reference processes, namely, the deposit reference process and the residential mortgage loan (RML) reference process. This enables us to specify optimal deposit inflows as well as optimal marketable securities allocation by using actuarial cost methods to establish an ideal level of subprime RML extension. In our research, relationships are established in order to construct a stochastic continuous-time banking model to determine a solution for this optimal control problem which is driven by geometric Brownian motion. In this regard, the main issues to be addressed in this dissertation are discussed in Chapters 2 and 3. In Chapter 2, we investigate uncertain banking behavior. In this regard, we consider continuous-time stochastic models for OR's assets, liabilities, capital, balance sheet as well as its reference processes and give a description of their dynamics for each stochastic model as well as the dynamics of OR's stylized balance sheet. In this chapter, we consider RML and deposit reference processes which will serve as leading indicators in order to establish a desirable level of subprime RMLs to be extended at the end of the risk horizon. Chapter 3 states the main results that pertain to the role of stochastic optimal control in OR's risk management in Theorem 2.5.1 and Corollary 2.5.2. Prior to the stochastic control problem, we discuss an OR's risk factors, the stochastic dynamics of marketable securities as well as the RML nancing spread method regarding an OR. Optimal portfolio choices are made regarding deposit and marketable securities inflow rates given by Theorem 3.4.1 in order to obtain the ideal RML extension level. We construct the stochastic continuoustime model to determine a solution for this optimal control problem to obtain the optimal marketable securities allocation and deposit inflow rate to ensure OR's stability and security. According to this, a spread method of RML financing is imposed with an existence condition given by Lemma 3.3.2. A numerical example is given in Section 3.5 to illustrates the main issues raised in our research.en_US
dc.publisherNorth-West University
dc.subjectOriginator (OR)en_US
dc.subjectSubprime residential mortgage loans (RMLs)en_US
dc.subjectMarketable securitiesen_US
dc.subjectDepositsen_US
dc.subjectLiquidity risken_US
dc.subjectCredit crunch risken_US
dc.subjectFunding risken_US
dc.subjectStochastic modelen_US
dc.subjectRML reference processen_US
dc.subjectDeposit reference processen_US
dc.subjectSubprima residensiële verbandleningsen_US
dc.subjectBemarkbare sekuriteiteen_US
dc.subjectDeposito'sen_US
dc.subjectLikiditeitsrisikoen_US
dc.subjectKredietkrisis-risikoen_US
dc.subjectBefondsingsrisikoen_US
dc.subjectStogastiese modelen_US
dc.subjectResidensiële verbandlenings verwysingsprosesen_US
dc.subjectDeposito verwysingsprosesen_US
dc.titleStochastic optimization of subprime residential mortgage loan funding and its risksen
dc.typeThesisen_US
dc.description.thesistypeMastersen_US
dc.contributor.researchID20999488 - Mulaudzi, Mmboniseni Phanuel (Supervisor)
dc.contributor.researchID12359017 - Mukuddem-Petersen, Janine (Supervisor)
dc.contributor.researchID12307785 - Petersen, Mark Adam (Supervisor)


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