Portfolio Optimization in a Semi-Markov Modulated Market |
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| Authors: | Mrinal K Ghosh Anindya Goswami Suresh K Kumar |
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| Institution: | (1) Department of Mathematics, Indian Institute of Science, Bangalore, 560012, India;(2) Department of Mathematics, Indian Institute of Technology Bombay, Mumbai, 76, India |
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| Abstract: | We address a portfolio optimization problem in a semi-Markov modulated market. We study both the terminal expected utility
optimization on finite time horizon and the risk-sensitive portfolio optimization on finite and infinite time horizon. We
obtain optimal portfolios in relevant cases. A numerical procedure is also developed to compute the optimal expected terminal
utility for finite horizon problem.
This work was supported in part by a DST project: SR/S4/MS: 379/06; also supported in part by a grant from UGC via DSA-SAP
Phase IV, and in part by a CSIR Fellowship. |
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| Keywords: | Risk-sensitive control Semi-Markov process Fixed income securities Nonnegative factors |
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