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A General Optimal Investment Model in the Presence of Background Risk

Moawia Alghalith, Xu Guo, Wing-Keung Wong () and Lixing Zhu

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we present two dynamic models of background risk. We first present a stochastic factor model with an additive background risk. Thereafter, we present a dynamic model of simultaneous (correlated) multiplicative background risk and additive background risk. In so doing, we use a general utility function.

Keywords: Stochastic factor model; utility function (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ore, nep-pke, nep-rmg and nep-upt
Date: 2016-04
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Handle: RePEc:pra:mprapa:70644