| Summary: | 碩士 === 國立東華大學 === 會計與財務碩士學位學程 === 99 === This investigation discusses how the risky bond’s default events change the investors’asset allocations. Investors’ portfolio includes one risk-free asset and two risky assets,which is the representative assets for the stocks and default-able zero-coupon bonds.Considering both fixed and stochastic volatilities of stock asset, we analyze the investors’ portfolio selection when they face the default risk of risky bond, through a stochastic dynamic programming approach. Specifically, this study analyzes the speculative demands and hedging demands of the investors. The current result indicates that no matter in the situation of fixed or stochastic volatilities of stock asset, investors would like to increase the holdings of stock and decrease the holdings of default-able risky bond. For hedging the default risk of risky bond, the investors will have a hedging demand on the risky stock.
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