Risk-Sensitive Portfolio Optimization and Its Applications

Abstract

Risk-sensitive portfolio optimization problem is studied with a specific setting: a market model with a two-dimensional linear-factor is considered, where the factor consisits of an Ornshtein-Uhlenbeck process. A sharp solvability condition is obtained in risk-seeking case. Further, an application of a CPPI technique is mentioned to treat a problem with floor-constraint. And as its application, we give the sample numerical simulation results with CPPI approach.