Long run risk sensitive portfolio with general factors

2015/08/22 by Marcin Pitera, Pitera, Marcin, Łukasz Stettner +1
Economics, Econometrics and Finance · Mathematics · #91G10 #91G80 #93E20 #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Optimization and Control (math.OC) #Portfolio Management (q-fin.PM) #Risk Management (q-fin.RM) #math.OC #msc:91G10 #msc:91G80 #msc:93E20 #q-fin.MF #q-fin.PM #q-fin.RM

paper · pdf · doi:10.48550/arxiv.1508.05460

arxiv created 2015/08/22 · arxiv updated 2015/08/25

Abstract

In the paper portfolio optimization over long run risk sensitive criterion is considered. It is assumed that economic factors which stimulate asset prices are ergodic but non necessarily uniformly ergodic. Solution to suitable Bellman equation using local span contraction with weighted norms is shown. The form of optimal strategy is presented and examples of market models satisfying imposed assumptions are shown.

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