Risk Sensitive Portfolio Optimization in a Jump Diffusion Model with Regimes

Milan Kumar Das, Anindya Goswami (anindya.goswami@gmail.com) and Nimit Rana

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Abstract: This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive portfolio optimization on the finite time horizon. We study the problem by using a probabilistic approach to establish the existence and uniqueness of the classical solution to the corresponding Hamilton-Jacobi-Bellman (HJB) equation. We also implement a numerical scheme to investigate the behavior of solutions for different values of the initial portfolio wealth, the maturity, and the risk of aversion parameter.

Date: 2016-03, Revised 2018-01
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Citations: View citations in EconPapers (9)

Published in SIAM J. Control Optim. 56 (2018), 1550-576

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