Can I read Parameter Identification for Portfolio Optimization with a Slow Stochastic Factor on EtoBox?

Parameter Identification for Portfolio Optimization with a Slow Stochastic Factor by Lei Hu; Dinghua Xu is a Mathematics article available to read on EtoBox.

What is Parameter Identification for Portfolio Optimization with a Slow Stochastic Factor about?

## Abstract In this paper, we intend to identify two significant parameters – expected return and absolute risk aversion – in the Merton portfolio optimization problem under an exponential utility function where volatility is driven by a slow mean-reverting diffusion process. First, we find the approximate solution of the fully nonlinear Hamilton–Jacobi–Bellman equation for the Merton model by the stochastic asymptotic approximation method. Second, we estimate parameters – expected return and absolute risk aversion – through the approximate solution and prove the uniqueness and stability of the parameter identification problem. Finally, we provide an illustrative example to demonstrate the capacity and efficiency of our method.

Who reads Parameter Identification for Portfolio Optimization with a Slow Stochastic Factor?

Author

Lei Hu; Dinghua Xu

Publisher

Walter de Gruyter GmbH

Published

2022

Language

EN

Field

Mathematics (Physical Sciences)