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June 2016 Markov decision process algorithms for wealth allocation problems with defaultable bonds
Iker Perez, David Hodge, Huiling Le
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Adv. in Appl. Probab. 48(2): 392-405 (June 2016).

Abstract

In this paper we are concerned with analysing optimal wealth allocation techniques within a defaultable financial market similar to Bielecki and Jang (2007). We study a portfolio optimization problem combining a continuous-time jump market and a defaultable security; and present numerical solutions through the conversion into a Markov decision process and characterization of its value function as a unique fixed point to a contracting operator. In this paper we analyse allocation strategies under several families of utility functions, and highlight significant portfolio selection differences with previously reported results.

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Iker Perez. David Hodge. Huiling Le. "Markov decision process algorithms for wealth allocation problems with defaultable bonds." Adv. in Appl. Probab. 48 (2) 392 - 405, June 2016.

Information

Published: June 2016
First available in Project Euclid: 9 June 2016

zbMATH: 06606991
MathSciNet: MR3511767

Subjects:
Primary: 91G10
Secondary: 90C40

Rights: Copyright © 2016 Applied Probability Trust

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Vol.48 • No. 2 • June 2016
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