2011/06/09 by Santiago Moreno–Bromberg, Santiago Moreno-Bromberg, Moreno-Bromberg, Santiago +5
Economics, Econometrics and Finance · Mathematics · #60G44 #60H30 #91B30 #Capital Investment and Risk Analysis #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Portfolio Management (q-fin.PM) #Probability (math.PR) #Stochastic processes and financial applications #math.PR #msc:60G44 #msc:60H30 #msc:91B30 #q-fin.PM
paper · pdf · doi:10.48550/arxiv.1106.1702
openalex publication_date 2011/06/09 · arxiv created 2012/03/16 · arxiv updated 2012/03/19 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the prices of financial assets are modeled by Itô processes. The dynamic risk constraints, which are time and state dependent, are generated by risk measures. Optimal trading strategies are characterized by a quadratic BSDE. Within the class of time consistent distortion risk measures, a three-fund separation result is established. Numerical results emphasize the effects of imposing risk constraints on trading.