A General Optimal Investment Model in the Presence of Background Risk
9 Pages Posted: 19 Aug 2012
Date Written: August 18, 2012
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, optimal investment, background risk
Suggested Citation: Suggested Citation
Alghalith, Moawia and Wong, Wing-Keung and Zhu, Lixing and Guo, Xu, A General Optimal Investment Model in the Presence of Background Risk (August 18, 2012). Available at SSRN: https://ssrn.com/abstract=2131765 or http://dx.doi.org/10.2139/ssrn.2131765
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