Downside risk minimization via a large deviations approach

DOI10.1214/11-AAP781zbMATH Open1242.91223arXiv1205.0672OpenAlexW3104160683MaRDI QIDQ417076FDOQ417076

Hideo Nagai

Publication date: 13 May 2012

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: We consider minimizing the probability of falling below a target growth rate of the wealth process up to a time horizon $T$ in an incomplete market model, and then study the asymptotic behavior of minimizing probability as $Toinfty$. This problem can be closely related to an ergodic risk-sensitive stochastic control problem in the risk-averse case. Indeed, in our main theorem, we relate the former problem concerning the asymptotics for risk minimization to the latter as its dual. As a result, we obtain an expression of the limit value of the probability as the Legendre transform of the value of the control problem, which is characterized as the solution to an H-J-B equation of ergodic type, in the case of a Markovian incomplete market model.

Full work available at URL: https://arxiv.org/abs/1205.0672

zbMATH Keywords

large deviationlong-term investmentH-J-B equation of ergodic typerisk-sensitive stochastic control

Mathematics Subject Classification ID

Large deviations (60F10) Auctions, bargaining, bidding and selling, and other market models (91B26) Variational methods for elliptic systems (35J50) Dynamic programming in optimal control and differential games (49L20) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Cites Work

• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Title not available (Why is that?)
• Linear and quasilinear elliptic equations
• Optimal long term growth rate of expected utility of wealth
• Optimal Strategies for Risk-Sensitive Portfolio Optimization Problems for General Factor Models
• Risk-sensitive dynamic asset management
• Beating a moving target: optimal portfolio strategies for outperforming a stochastic benchmark
• Portfolio choice with endogenous utility: a large deviations approach.
• A large deviations approach to optimal long term investment
• Risk-sensitive control and an optimal investment model.
• Risk-sensitive control and an optimal investment model. II.
• Risk Sensitive Portfolio Management with Cox--Ingersoll--Ross Interest Rates: The HJB Equation
• On the principal eigenvalue of second-order elliptic differential operators
• A risk-sensitive control dual approach to a large deviations control problem
• Some results on risk-sensitive control with full observation
• Risk-sensitive dynamic portfolio optimization with partial information on infinite time horizon.
• Asymptotics of the probability minimizing a ``down-side risk
• Asymptotics of the probability of minimizing ‘down-side’ risk under partial information
• Risk-sensitive benchmarked asset management
• Risk-sensitive portfolio optimization on infinite time horizon
• Bellman Equations of Risk-Sensitive Control
• Explicit solution to a certain non-ELQG risk-sensitive stochastic control problem
• A risk-sensitive stochastic control approach to an optimal investment problem with partial information

Cited In (13)

• On long term investment optimality
• Discrete‐time risk sensitive portfolio optimization with proportional transaction costs
• Large time asymptotic problems for optimal stochastic control with superlinear cost
• Risk-sensitive asset management in a Wishart-autoregressive factor model with jumps
• The generalized principal eigenvalue for Hamilton-Jacobi-Bellman equations of ergodic type
• Risk-sensitive asset management in a general diffusion factor model: risk-seeking case
• Long Time Asymptotics for Optimal Investment
• Infinite horizon risk-sensitive control of diffusions without any blanket stability assumptions
• Risk-sensitive asset management with lognormal interest rates
• H-J-B equations of optimal consumption-investment and verification theorems
• Ergodic Problems for Viscous Hamilton--Jacobi Equations with Inward Drift
• Variance-optimal martingale measures for diffusion processes with stochastic coefficients
• Duality between large deviation control and risk-sensitive control for Markov decision processes

This page was built for publication: Downside risk minimization via a large deviations approach

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q417076)