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Representation of homothetic forward performance processes in stochastic factor models via ergodic and infinite horizon BSDE
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Liang, Gechun and Zariphopoulou, Thaleia (2017) Representation of homothetic forward performance processes in stochastic factor models via ergodic and infinite horizon BSDE. SIAM Journal on Financial Mathematics, 8 (1). pp. 344-372. doi:10.1137/15M1048847 ISSN 1945-497X .
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Official URL: http://dx.doi.org/10.1137/15M1048847
Abstract
In an incomplete market, with incompleteness stemming from stochastic factors imperfectly correlated with the underlying stocks, we derive representations of homothetic (power, exponential, and logarithmic) forward performance processes in factor-form using ergodic BSDE. We also develop a connection between the forward processes and infinite horizon BSDE, and, moreover, with risk-sensitive optimization. In addition, we develop a connection, for large time horizons, with a family of classical homothetic value function processes with random endowments.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HG Finance | ||||||
Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||
Library of Congress Subject Headings (LCSH): | Stock price forecasting, Stock exchanges -- Mathematical models, Stochastic differential equations | ||||||
Journal or Publication Title: | SIAM Journal on Financial Mathematics | ||||||
Publisher: | Society for Industrial and Applied Mathematics | ||||||
ISSN: | 1945-497X | ||||||
Official Date: | 6 June 2017 | ||||||
Dates: |
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Volume: | 8 | ||||||
Number: | 1 | ||||||
Page Range: | pp. 344-372 | ||||||
DOI: | 10.1137/15M1048847 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Reuse Statement (publisher, data, author rights): | First Published in SIAM Journal on Financial Mathematics in 8 (1). pp. 344-372, 2018 published by the Society for Industrial and Applied Mathematics (SIAM) | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 11 October 2018 | ||||||
Date of first compliant Open Access: | 11 October 2018 |
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