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Risk-Sensitive Asset Management under a Wishart Autoregressive Factor Model
Department of Mathematics, Faculty of Education, Shizuoka University, Ohya, Japan
Division of Applied Mathematics for Social Systems, Graduate School of Engineering Science, Osaka University, Toyonaka, Japan
- 1 Department of Mathematics, Faculty of Education, Shizuoka University, Ohya, Japan
- 2 Division of Applied Mathematics for Social Systems, Graduate School of Engineering Science, Osaka University, Toyonaka, Japan
Journal of Mathematical Finance·Volume 03 (2013)·Pages 222–229·Published 29 March 2013·DOI10.4236/jmf.2013.31A021
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Abstract
The risk-sensitive asset management problem with a finite horizon is studied under a financial market model having a Wishart autoregressive stochastic factor, which is positive-definite symmetric matrix-valued. This financial market model has the following interesting features: 1) it describes the stochasticity of the market covariance structure, interest rates, and the risk premium of the risky assets; and 2) it admits the explicit representations of the solution to the risk-sensitive asset management problem.
KeywordsRisk-Sensitive Asset ManagementWishart Autoregressive Stochastic FactorStochastic CovarianceStochastic Interest RateStochastic Risk PremiumRiccati Differential Equation
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