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A Stochastic Flows Approach for Asset Allocation with Hidden Economic Environment

Tak Kuen Siu

International Journal of Stochastic Analysis2015https://doi.org/10.1155/2015/462524article
ABDC B
Weight
0.51

Abstract

An optimal asset allocation problem for a quite general class of utility functions is discussed in a simple two-state Markovian regime-switching model, where the appreciation rate of a risky share changes over time according to the state of a hidden economy. As usual, standard filtering theory is used to transform a financial model with hidden information into one with complete information, where a martingale approach is applied to discuss the optimal asset allocation problem. Using a martingale representation coupled with stochastic flows of diffeomorphisms for the filtering equation, the integrand in the martingale representation is identified which gives rise to an optimal portfolio strategy under some differentiability conditions.

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https://doi.org/https://doi.org/10.1155/2015/462524

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@article{tak2015,
  title        = {{A Stochastic Flows Approach for Asset Allocation with Hidden Economic Environment}},
  author       = {Tak Kuen Siu},
  journal      = {International Journal of Stochastic Analysis},
  year         = {2015},
  doi          = {https://doi.org/https://doi.org/10.1155/2015/462524},
}

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A Stochastic Flows Approach for Asset Allocation with Hidden Economic Environment

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Evidence weight

0.51

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.52 × 0.4 = 0.21
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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