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Dynamic Asset Management: Risk Sensitive Criterion with Nonnegative Factors Constraints

In: Recent Developments In Mathematical Finance

Author

Listed:
  • Arunabha Bagchi

    (Faculty of Mathematical Sciences University Twente, P.O. Box 217, 7500AE Enschede, The Netherlands)

  • K. Suresh Kumar

    (Department of Mathematics, Indian Institute of Technology Bombay, Mumbai, India)

Abstract

We extend an important recent work on risk-sensitive dynamic asset allocation to include nonnegativity constraints on the economic factors in the model. This is done in two steps. We first convert the dynamic asset allocation problem into an equivalent stochastic differential game. We then impose nonnegativity constraints on the game problem. We solve this new problem using some recent general results on such constrained stochastic differential games.

Suggested Citation

  • Arunabha Bagchi & K. Suresh Kumar, 2001. "Dynamic Asset Management: Risk Sensitive Criterion with Nonnegative Factors Constraints," World Scientific Book Chapters, in: Jiongmin Yong (ed.), Recent Developments In Mathematical Finance, chapter 1, pages 1-11, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812799579_0001
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