Dynamic Portfolio Optimization With Defaultable Bond And Regime-Switching On Non-Gaussian Ornstein-Uhlenbeck Process

In this paper, we consider portfolio optimization problem in a defaultable mar-ket with switching economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market coefficients are assumed to depend on the market regime in place, which is modeled by a continuous time Non-Gaussian Ornstein-Uhlenbeck process. By separating the utili-ty maximization problem into a pre-default and post-default component, we deduce two coupled Hamilton-Jacobi-Bellman equations for the post and pre-default optimal value functions,and show a novel verification theorem for their solutions.