Discrete time risk sensitive portfolio optimization with consumption and proportional transaction costs

Łukasz Stettner

Applicationes Mathematicae (2005)

  • Volume: 32, Issue: 4, page 395-404
  • ISSN: 1233-7234

Abstract

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Risk sensitive and risk neutral long run portfolio problems with consumption and proportional transaction costs are studied. Existence of solutions to suitable Bellman equations is shown. The asymptotics of the risk sensitive cost when the risk factor converges to 0 is then considered. It turns out that optimal strategies are stationary functions of the portfolio (portions of the wealth invested in assets) and of economic factors. Furthermore an optimal portfolio strategy for a risk neutral control problem is nearly optimal for a risk sensitive portfolio cost functional with risk factor close to 0.

How to cite

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Łukasz Stettner. "Discrete time risk sensitive portfolio optimization with consumption and proportional transaction costs." Applicationes Mathematicae 32.4 (2005): 395-404. <http://eudml.org/doc/279351>.

@article{ŁukaszStettner2005,
abstract = {Risk sensitive and risk neutral long run portfolio problems with consumption and proportional transaction costs are studied. Existence of solutions to suitable Bellman equations is shown. The asymptotics of the risk sensitive cost when the risk factor converges to 0 is then considered. It turns out that optimal strategies are stationary functions of the portfolio (portions of the wealth invested in assets) and of economic factors. Furthermore an optimal portfolio strategy for a risk neutral control problem is nearly optimal for a risk sensitive portfolio cost functional with risk factor close to 0.},
author = {Łukasz Stettner},
journal = {Applicationes Mathematicae},
keywords = {risk sensitive control; discrete time Markov processes; wealth process; optimal portfolio; Bellman equation},
language = {eng},
number = {4},
pages = {395-404},
title = {Discrete time risk sensitive portfolio optimization with consumption and proportional transaction costs},
url = {http://eudml.org/doc/279351},
volume = {32},
year = {2005},
}

TY - JOUR
AU - Łukasz Stettner
TI - Discrete time risk sensitive portfolio optimization with consumption and proportional transaction costs
JO - Applicationes Mathematicae
PY - 2005
VL - 32
IS - 4
SP - 395
EP - 404
AB - Risk sensitive and risk neutral long run portfolio problems with consumption and proportional transaction costs are studied. Existence of solutions to suitable Bellman equations is shown. The asymptotics of the risk sensitive cost when the risk factor converges to 0 is then considered. It turns out that optimal strategies are stationary functions of the portfolio (portions of the wealth invested in assets) and of economic factors. Furthermore an optimal portfolio strategy for a risk neutral control problem is nearly optimal for a risk sensitive portfolio cost functional with risk factor close to 0.
LA - eng
KW - risk sensitive control; discrete time Markov processes; wealth process; optimal portfolio; Bellman equation
UR - http://eudml.org/doc/279351
ER -

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