Fund Separation and Fractional Kelly Strategies

Mark H. A. Davis and Sebastien Lleo

Chapter 9 in Risk-Sensitive Investment Management, 2014, pp 207-226 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In the diffusions setting introduced in Part I, investment management models have a significant benefit: they generate an investment strategy in closed form. This closed form strategy can be transformed, via a fund separation theorem or a fractional Kelly strategy, into a practical recipe for constructing investable portfolios…

Keywords: Stochastic Control; Risk Sensitive Control; Dynamic Investment Management; Benchmarked Asset Management; Asset and Liability Management; Jump Diffusion Processes; Lévy Processes; Hamilton–Jacobi–Bellman Equations; Classical Solutions; Viscosity Solutions; Kelly Criterion (search for similar items in EconPapers)
Date: 2014
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