A General Optimal Investment Model in the Presence of Background Risk

9 Pages Posted: 19 Aug 2012

See all articles by Moawia Alghalith

Moawia Alghalith

University of the West Indies (UWI)

Wing-Keung Wong

Asia University, Department of Finance

Lixing Zhu

affiliation not provided to SSRN

Xu Guo

affiliation not provided to SSRN

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

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

Moawia Alghalith

University of the West Indies (UWI) ( email )

St. Augustine
Cave Hill Campus
868
Jamaica

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

Lixing Zhu

affiliation not provided to SSRN

Xu Guo

affiliation not provided to SSRN

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