A General Optimal Investment Model in The Presence of Background Risk

Moawia Alghalith, Xu Guo, Wing Keung Wong*, Lixing Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

In this paper we present two dynamic models of background risk. We first present a stochastic factor model with an additive background risk. Then, we present a dynamic model of simultaneous (correlated) multiplicative background risk and additive background risk. In so doing, we use a general utility function.

Original languageEnglish
Article number1650001
JournalAnnals of Financial Economics
Volume11
Issue number1
DOIs
Publication statusPublished - Mar 2016

Scopus Subject Areas

  • Business and International Management
  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • additive background risk
  • dynamic model
  • multiplicative background risk
  • optimal investment
  • Stochastic factor

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