Risk-sensitive benchmarked asset management
نویسندگان
چکیده
This paper extends the risk-sensitive asset management theory developed by Bielecki and Pliska and by Kuroda and Nagai to the case where the investor’s objective is to outperform an investment benchmark. The main result is a mutual fund theorem. Every investor following the same benchmark will take positions, in proportions dependent on his/her risk sensitivity coefficient, in two funds: the logoptimal portfolio and a second fund which adjusts for the correlation between the traded assets, the benchmark and the underlying valuation factors.
منابع مشابه
Game-theoretic approach to risk-sensitive benchmarked asset management
In this article we consider a game theoretic approach to the Risk-Sensitive Benchmarked Asset Management problem (RSBAM) of Davis and Lleo [6]. In particular, we consider a stochastic differential game between two players, namely, the investor who has a power utility while the second player represents the market which tries to minimize the expected payoff of the investor. The market does this b...
متن کاملRisk-Sensitive Asset Management under a Wishart Autoregressive Factor Model
The risk-sensitive asset management problem with a finite horizon is studied under a financial market model having a Wishart autoregressive stochastic factor, which is positive-definite symmetric matrix-valued. This financial market model has the following interesting features: 1) it describes the stochasticity of the market covariance structure, interest rates, and the risk premium of the risk...
متن کاملEffect of Asset and Liability management on Liquidity risk of Iranian Banks
In financial markets, the main component of risk management is liquidity risk. Asset and Liability Management (ALM) strategy is concerned with managing all risks. Asset and liability management seeks to manage liquidity risk, which refers to both the liquidity of markets and which assets can be translated into cash. The liquidity is importantly affected by the management of banks’ balance sheet...
متن کاملPerformance of Credit Risk Management in Indian Commercial Banks
For banks and financial institutions, credit risk had been an essential factor that needed to be managed well. Credit risk was the possibility that a borrower of counter party would fail to meet its obligations in accordance with agreed terms. Credit risk; therefore arise from the bank’s dealings with or lending to corporate, individuals, and other banks or financial institutions. Credit risk...
متن کاملNoise Trading Approach of Capital Asset Pricing at Tehran Stock Exchange
Noise traders as one of the key elements of the market play a significant role in determining the market volatilities, returns, and stock market mispricing. Hence, this study attempts to scrutinize the role of noise trading in capital asset pricing. Therefore, by using daily data, samples including 14105 data of 200 companies listed on stock exchange were selected and noise trading index was es...
متن کامل