TITLE:
Risk-Sensitive Asset Management under a Wishart Autoregressive Factor Model
AUTHORS:
Hiroaki Hata, Jun Sekine
KEYWORDS:
Risk-Sensitive Asset Management; Wishart Autoregressive Stochastic Factor; Stochastic Covariance; Stochastic Interest Rate; Stochastic Risk Premium; Riccati Differential Equation
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.3 No.1A,
March
29,
2013
ABSTRACT: The risk-sensitive asset management problem with a finite horizon is studied under a financial market model having a Wishart autoregressive stochastic factor, which is positive-definite symmetric matrix-valued. This financial market model has the following interesting features: 1) it describes the stochasticity of the market covariance structure, interest rates, and the risk premium of the risky assets; and 2) it admits the explicit representations of the solution to the risk-sensitive asset management problem.