Risk sensitive portfolio optimization in a jump diffusion model with regimes

DOI10.1137/17M1121809zbMATH Open1390.91278arXiv1603.09149WikidataQ129947127 ScholiaQ129947127MaRDI QIDQ4637645FDOQ4637645

Authors: Milan Kumar Das, Anindya Goswami, Nimit Rana 

Publication date: 25 April 2018

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

Abstract: This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional 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 (HJB) 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.

Full work available at URL: https://arxiv.org/abs/1603.09149

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zbMATH Keywords

portfolio optimizationrisk sensitive criterionfinite horizonsemi-Markov switchingjump diffusion market model

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Portfolio theory (91G10) Applications of stochastic analysis (to PDEs, etc.) (60H30) Optimal stochastic control (93E20)

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Cited In (15)

• Risk-sensitive control for a class of diffusions with jumps
• Discrete‐time risk sensitive portfolio optimization with proportional transaction costs
• Portfolio optimization in a semi-Markov modulated market
• Title not available (Why is that?)
• Risk-sensitive mean field games with major and minor players
• Jump-diffusion risk-sensitive asset management I: Diffusion factor model
• Portfolio problems based on jump-diffusion models
• Semimartingale representation of a class of semi-Markov dynamics
• Risk-sensitive zero-sum stochastic differential game for jump-diffusions
• Portfolio optimization for jump‐diffusion risky assets with common shock dependence and state dependent risk aversion
• Pricing derivatives in a regime switching market with time inhomogenous volatility
• Inference of binary regime models with jump discontinuities
• Risk sensitive portfolio optimization with default contagion and regime-switching
• Optimal Portfolio and Consumption Policies Subject to Rishel's Important Jump Events Model: Computational Methods
• Analysis of optimal portfolio on finite and small-time horizons for a stochastic volatility market model

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