Explicit solution to a certain non-ELQG risk-sensitive stochastic control problem (Q607784): Difference between revisions

A risk-sensitive stochastic control problem with finite/infinite horizon is studied with 1-di\-men\-sion\-al controlled process defined by a linear Stochastic Differential Equation (SDE) with a linear control term in the drift. In the criterion function, a quadratic term is introduced by using the solution to a Riccati differential equation, and hence, the problem is not ELQG (Exponential Linear Quadratic Gaussian) in general. For the considered problem, optimal value and control are calculated in explicit forms and the set of admissible risk-sensitive parameters is given in a concrete form. Two important applications of the considered problem, motivated from finance, are presented: Risk-sensitive portfolio optimization and Large deviations controls. An ample cited literature contains 38 items.