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

DOI10.1137/110825881zbMATH Open1291.35409arXiv1102.5126OpenAlexW1999768877MaRDI QIDQ2840144FDOQ2840144

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)

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.

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

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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)

Cited In (22)

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