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Long run risk sensitive portfolio with general factors

Author

Listed:
  • Marcin Pitera

    (Jagiellonian University)

  • Łukasz Stettner

    (Polish Academy of Sciences
    Vistula University)

Abstract

In the paper portfolio optimization over long run risk sensitive criterion is considered. It is assumed that economic factors which stimulate asset prices are ergodic but non necessarily uniformly ergodic. Solution to suitable Bellman equation using local span contraction with weighted norms is shown. The form of optimal strategy is presented and examples of market models satisfying imposed assumptions are shown.

Suggested Citation

  • Marcin Pitera & Łukasz Stettner, 2016. "Long run risk sensitive portfolio with general factors," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 83(2), pages 265-293, April.
    • Handle: RePEc:spr:mathme:v:83:y:2016:i:2:d:10.1007_s00186-015-0528-7
    DOI: 10.1007/s00186-015-0528-7
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    References listed on IDEAS

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    1. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
    2. Lukasz Stettner, 1999. "Risk sensitive portfolio optimization," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 50(3), pages 463-474, December.
    3. Alexander Cherny & Dilip Madan, 2009. "New Measures for Performance Evaluation," The Review of Financial Studies, Society for Financial Studies, vol. 22(7), pages 2371-2406, July.
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    Citations

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    Cited by:

    1. Rubén Blancas-Rivera & Rolando Cavazos-Cadena & Hugo Cruz-Suárez, 2020. "Discounted approximations in risk-sensitive average Markov cost chains with finite state space," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 91(2), pages 241-268, April.
    2. Marcin Pitera & {L}ukasz Stettner, 2019. "Long-run risk sensitive dyadic impulse control," Papers 1906.06389, arXiv.org.
    3. Julio Saucedo-Zul & Rolando Cavazos-Cadena & Hugo Cruz-Suárez, 2020. "A Discounted Approach in Communicating Average Markov Decision Chains Under Risk-Aversion," Journal of Optimization Theory and Applications, Springer, vol. 187(2), pages 585-606, November.
    4. Gustavo Portillo-Ramírez & Rolando Cavazos-Cadena & Hugo Cruz-Suárez, 2023. "Contractive approximations in average Markov decision chains driven by a risk-seeking controller," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 98(1), pages 75-91, August.
    5. Damian Jelito & Marcin Pitera & {L}ukasz Stettner, 2019. "Long-run risk sensitive impulse control," Papers 1912.02488, arXiv.org, revised Apr 2020.
    6. Rolando Cavazos-Cadena, 2018. "Characterization of the Optimal Risk-Sensitive Average Cost in Denumerable Markov Decision Chains," Mathematics of Operations Research, INFORMS, vol. 43(3), pages 1025-1050, August.
    7. Marcin Pitera & {L}ukasz Stettner, 2022. "Discrete-time risk sensitive portfolio optimization with proportional transaction costs," Papers 2201.02828, arXiv.org.
    8. Marcin Pitera & Mikl'os R'asonyi, 2023. "Utility-based acceptability indices," Papers 2310.02014, arXiv.org.
    9. Carlos Camilo-Garay & Rolando Cavazos-Cadena & Hugo Cruz-Suárez, 2022. "Contractive Approximations in Risk-Sensitive Average Semi-Markov Decision Chains on a Finite State Space," Journal of Optimization Theory and Applications, Springer, vol. 192(1), pages 271-291, January.

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