Abstract
In this article we consider a game theoretic approach to the Risk-Sensitive Benchmarked Asset Management problem (RSBAM) of Davis and Lleo [Quantitative Finance 8(4) (2008), 415-426]. 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 by modulating a stochastic benchmark that the investor needs to outperform. We obtain an explicit expression for the optimal pair of strategies as for both the players.
Original language | English |
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Pages (from-to) | 163-176 |
Number of pages | 14 |
Journal | Risk and Decision Analysis |
Volume | 5 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Jan 2014 |
Externally published | Yes |
Keywords
- Risk-sensitive control
- zero sum stochastic differential game