Risk-sensitive control and an optimal investment model. (Q2707143)

This paper deals with an optimal investment model in which the goal is to maximize the long-term growth rate of the expected utility of wealth. In the model, the utility function is hyperbolic absolute risk averse (HARA) and stochastic economic factors affect the mean returns of the securities. The authors reformulate this optimal investment problem as an infinite time horizon risk-sensitive control problem. Studying the dynamic programming equation associated with this control problem, they present some properties of the unique solution and derive some results concerning an optimal policy in the problem. As an example, they solve explicitly the problem in the Vasicek interest rate model, using their results.