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A General Optimal Investment Model in the Presence of Background Risk

Alghalith, Moawia and Guo, Xu and Wong, Wing-Keung and Zhu, Lixing (2016): A General Optimal Investment Model in the Presence of Background Risk.

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Abstract

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

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