Asia-Pacific Financial Markets

, Volume 18, Issue 1, pp 69–87

“Down-Side Risk” Probability Minimization Problem with Cox-Ingersoll-Ross’s Interest Rates

Article

DOI: 10.1007/s10690-010-9121-5

Cite this article as:
Hata, H. Asia-Pac Financ Markets (2011) 18: 69. doi:10.1007/s10690-010-9121-5

Abstract

With a bank account and a risky stock, both of which are affected by Cox-Ingersoll-Ross’s interest rates, we treat two “down-side risk” minimization problems of the large deviation probability for long-term investment. Explicit solutions of the problems are given by solving the associated risk-sensitive portfolio optimization problems.

Keywords

Large deviations control Risk-sensitive stochastic control Bellman equation Long-term investment CIR-interest rates Bessel process with linear drift 

Copyright information

© Springer Science+Business Media, LLC. 2010

Authors and Affiliations

  1. 1.Institute of MathematicsAcademia SinicaTaipeiTaiwan

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