Work

Risk Sensitive Portfolio Optimization in a Jump Diffusion Model with Regimes

Year: 2018

Type: article

Abstract: This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multidimensional jump diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive portfolio optimization on the finite time horizon. We study the problem by using a probabilistic approach to establish the existence and uniqueness of the classical solution to the corresponding Hamilton--Jacobi--Bellman equation. We also implement a numerical scheme to investigate the behavior of solutions for different values of the initial portfolio wealth, the maturity, and the risk of aversion parameter.

Source: SIAM Journal on Control and Optimization

DOI: 10.1137/17m1121809

Authors: Milan Kumar Das, Anindya Goswami, Nimit Rana

Institutions: Indian Institute of Science Education and Research Pune, University of York

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: University Grants Commission, Science and Engineering Research Board

Award: G1073385529