Solutions to a system of first order H-J equations related to a debt management problem
Abstract
The paper studies a system of first order Hamilton-Jacobi equations with discontinuous coefficients, arising from a model of deterministic optimal debt management in infinite time horizon, with exponential discount and currency devaluation. The existence of an equilibrium solution is obtained by a suitable concatenation of backward solutions to the system of Hamilton-Jacobi equations. A detailed analysis of the behavior of the solution as the debt-ratio-income x* +∞ is also provided.
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