Asymptotics of the probability of minimizing 'down-side' risk under partial information

Hideo Nagai

Quantitative Finance, 2011, vol. 11, issue 5, 789-803

Abstract: We consider minimizing the probability of falling below a target growth rate of the wealth process up to a time horizon T in an incomplete market model under partial information and then study the asymptotic behavior of the minimizing probability as T → ∞. This problem is closely related to an ergodic risk-sensitive stochastic control problem under partial information in the risk-averse case. Indeed, in our main theorem we relate the former problem to the latter as its dual. As a result we obtain an explicit expression for the limit value of the former problem in the case of linear Gaussian models.

Keywords: Multi-factor models; Stochastic analysis; Stochastic control; Downside risk; Portfolio management; Dynamic programming; Mathematics of finance; Kalnman filters (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/14697680903341814 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:11:y:2011:i:5:p:789-803

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697680903341814

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().