Risk Sensitive Asset Management: Two Empirical Examples

Bielecki, Tomasz R.; Harris, Allen C.; Li, J.; Pliska, Stanley R.

doi:10.1007/978-3-0348-8291-0_9

Cited by 3 publications

(3 citation statements)

References 8 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For optimal investment problems (RS) ∞ , the following linear factor model is well-studied. We can refer to [1], [2], [3], [4], [5], [6], [7], [8], [9], [10], [12], [13], [14], [15], [16], [17], [18], and [19], for example. Let (Ω, F, P, (F t ) t≥0 ) be a complete filtered probability space with the filtration (F t ) t≥0 generated by the d-dimensional Brownian motion w := (w 1 , .…”

Section: Setup With Linear-factor Modelmentioning

confidence: 99%

Risk-Sensitive Portfolio Optimization and Its Applications

Hayashi

2011

Stochastic Systems Theory and its Applications (SSS)

View full text Add to dashboard Cite

Risk-sensitive portfolio optimization problem is studied with a specific setting: a market model with a twodimensional linear-factor is considered, where the factor consisits of an Ornshtein-Uhlenbeck process. A sharp solvability condition is obtained in risk-seeking case. Further, an application of a CPPI technique is mentioned to treat a problem with floor-constraint. And as its application, we give the sample numerical simulation results with CPPI approach.

show abstract

Section: Setup With Linear-factor Modelmentioning

confidence: 99%

Risk-Sensitive Portfolio Optimization and Its Applications

Hayashi

2011

Stochastic Systems Theory and its Applications (SSS)

View full text Add to dashboard Cite

show abstract

“…The first [7] is a preliminary version of this one; it presents, without proof, some of the results in Section II and some of the fixed-income concepts of Section V. The second [8] provides a detailed study of the financial and economic aspects of our risk-sensitive criterion. The third companion to this paper is our [3]; based on market data it presents two numerical examples, one for equities and one for rolling horizon bonds.…”

Section: Introductionmentioning

confidence: 99%

“…Various versions of model (3), (4) have been studied by a variety of researchers in recent years. Usually it is assumed that the price and factor processes can be directly observed, but some models postulate only partial observations.…”

Section: Introductionmentioning

confidence: 99%

Risk-Sensitive ICAPM With Application to Fixed-Income Management

Bielecki

Pliska

2004

IEEE Trans. Automat. Contr.

View full text Add to dashboard Cite

This paper presents an application of risk-sensitive control theory in financial decision making. A variation of Merton's continuous-time intertemporal capital asset pricing model is developed where the infinite horizon objective is to maximize the portfolio's risk adjusted growth rate. The resulting model is tractable and thus provides economic insight about optimal trading strategies as well as the fact that the strategy of 100% cash is not necessarily the least risky one. For fixed-income applications we utilize the concept of rolling-horizon bonds, which are stochastic process models of certain mutual funds of zero coupon bonds. We show by numerical example that the optimal proportion of one's wealth to hold in an asset is given by a simple affine function of economic factors such as interest rates of various maturities.Index Terms-Fixed-income management, intertemporal capital asset pricing model, optimal portfolios, risk-sensitive control.

show abstract

Economic Properties of the Risk Sensitive Criterion for Portfolio Management

Bielecki

Pliska

2003

Review of Accounting and Finance

View full text Add to dashboard Cite

The idea of using stochastic control methods for theoretical studies of portfolio management has long been standard, with maximum expected utility criteria commonly being used. But in recent years a new kind of criterion, the risk sensitive criterion, has emerged from the control theory literature and been applied to portfolio management. This paper studies various economic properties of this criterion for portfolio management, thereby providing justification for its theoretical and practical use. In particular, it is shown that the risk sensitive criterion amounts to maximizing a portfolio's risk adjusted growth rate. In other words, it is essentially the same as what is commonly done in practice: find the best trade‐off between a portfolio's average return and its average volatility.

show abstract

Risk Sensitive Asset Management: Two Empirical Examples

Cited by 3 publications

References 8 publications

Risk-Sensitive Portfolio Optimization and Its Applications

Risk-Sensitive Portfolio Optimization and Its Applications

Risk-Sensitive ICAPM With Application to Fixed-Income Management

Economic Properties of the Risk Sensitive Criterion for Portfolio Management

Contact Info

Product

Resources

About