34. Stochastic differential games for optimal investment problems in a Markov regime-switching jump-diffusion market
Invited abstract in session MB-11: Optimal and stochastic optimal control 1, stream Optimal and stochastic optimal control.
Monday, 10:30-12:30Room: B100/5017
Authors (first author is the speaker)
| 1. | Gerhard-Wilhelm Weber
|
| Faculty of Engineering Management, Poznan University of Technology | |
| 2. | Emel Savku
|
| Department of Mathematics, University of Oslo |
Abstract
In their paper from behavioral finance, we employ dynamic programming principle on two optimal investment problems in a continuous-time Markov regime-switching setting. They model different states of an economy and, hence, investors’ floating levels of psychological reactions by a D-state Markov chain: a zero-sum game between an investor and the market, and a nonzero-sum stochastic differential portfolio game. We derive regime-switching Hamilton–Jacobi-Bellman-Isaacs equations, and explicit optimal portfolio strategies with Feynman-Kac representations of value functions. For a two-state special case the results are illustrated and the impact of regime switches observed by a comparison.
Keywords
- Optimal control and applications
- Computational game theory
- Stochastic optimization
Status: accepted
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