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Risk Seeking, Nonconvex Remuneration And Regime Switching

Author

Listed:
  • EMILIO BARUCCI

    (Dipartimento di Matematica — Politecnico di Milano, Via Bonardi 9, I-20133 Milano, Italy)

  • DANIELE MARAZZINA

    (Dipartimento di Matematica — Politecnico di Milano, Via Bonardi 9, I-20133 Milano, Italy)

Abstract

We investigate asset management in a regime switching framework when the fund manager aims to beat a certain target for the assets under management over an infinite horizon or over a finite horizon. We consider both a full information and a partial information setting. In a full information setting, the asset manager tends to take more risk in the good state and less risk in the bad state with respect to the constant parameter environment. Confidence risk induces the agent to increase his risk exposure.

Suggested Citation

  • Emilio Barucci & Daniele Marazzina, 2015. "Risk Seeking, Nonconvex Remuneration And Regime Switching," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-25.
    • Handle: RePEc:wsi:ijtafx:v:18:y:2015:i:02:n:s0219024915500090
    DOI: 10.1142/S0219024915500090
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    Citations

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    Cited by:

    1. Marco Nicolosi, 2018. "Optimal strategy for a fund manager with option compensation," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(1), pages 1-17, May.
    2. Katia Colaneri & Stefano Herzel & Marco Nicolosi, 2021. "The value of knowing the market price of risk," Annals of Operations Research, Springer, vol. 299(1), pages 101-131, April.
    3. Flavio Angelini & Katia Colaneri & Stefano Herzel & Marco Nicolosi, 2021. "Implicit incentives for fund managers with partial information," Computational Management Science, Springer, vol. 18(4), pages 539-561, October.
    4. Marco Nicolosi & Flavio Angelini & Stefano Herzel, 2018. "Portfolio management with benchmark related incentives under mean reverting processes," Annals of Operations Research, Springer, vol. 266(1), pages 373-394, July.

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