Jump-Diffusion Risk-Sensitive Asset Management II: Jump-Diffusion Factor Model
AbstractIn this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and investment constraints. In this case, the HJB equation is a partial integro-differential equation (PIDE). By combining viscosity solutions with a change of notation, a policy improvement argument and classical results on parabolic PDEs we prove that the HJB PIDE admits a unique smooth solution. A verification theorem concludes the resolution of this problem.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1102.5126.
Date of creation: Feb 2011
Date of revision: Sep 2012
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-05 (All new papers)
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