Jump-diffusion risk-sensitive asset management. II: Jump-diffusion factor model

DOI10.1137/110825881MaRDI QIDQ2840144zbMATH OpenOpenAlexFDO

Authors Mark H. A. Davis, Sébastien Lleo

Publication date 17 July 2013

Published in SIAM Journal on Control and Optimization (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1102.5126

zbMATH Keywords

viscosity solutionsclassical solutionsparabolic PDEPoisson point processesjump-diffusion processesrisk-sensitive stochastic controlasset managementpolicy improvementHJB PIDELévy processes

Mathematics Subject Classification ID

PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) Portfolio theory (91G10) Viscosity solutions to PDEs (35D40) Integro-partial differential equations (35R09) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Abstract: In this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and investment constraints. In this case, the HJB equation is a partial integro-differential equation (PIDE). By combining viscosity solutions with a change of notation, a policy improvement argument and classical results on parabolic PDEs we prove that the HJB PIDE admits a unique smooth solution. A verification theorem concludes the resolution of this problem.

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(22)

• Partial information about contagion risk, self-exciting processes and portfolio optimization
• Risk-sensitive control for a class of diffusions with jumps
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• On long term investment optimality
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• Risk-sensitive asset management in a Wishart-autoregressive factor model with jumps
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• On the parabolic equation for portfolio problems
• A risk-sensitive maximum principle for a Markov regime-switching jump-diffusion system and applications
• Jump-diffusion risk-sensitive asset management I: Diffusion factor model
• Stochastic maximum principle for partially observed risk‐sensitive optimal control problems of mean‐field forward‐backward stochastic differential equations
• Risk-sensitive asset management in a general diffusion factor model: risk-seeking case
• Risk-sensitive asset management with lognormal interest rates
• Credit portfolio selection with decaying contagion intensities
• Classical solutions of the backward PIDE for Markov modulated marked point processes and applications to CAT bonds
• A note on a new approach to both price and volatility jumps: an application to the portfolio model
• Jump-diffusion asset-liability management via risk-sensitive control
• Risk-sensitive credit portfolio optimization under partial information and contagion risk
• Mean-variance reinsurance and asset liability management with common shock via non-Markovian stochastic factors
• Jump-diffusion risk-sensitive benchmarked asset management with traditional and alternative data

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