Simulating Portfolio Decisions under Uncertainty When the Risky Asset and Short Rate Are Modulated by an Inhomogeneous and Asset-Dependent Markov Chain

Simulating Portfolio Decisions under Uncertainty When the Risky Asset and Short Rate Are Modulated by an Inhomogeneous and Asset-Dependent Markov Chain

This paper aims to simulate portfolio decisions under uncertainty when the diffusion parameters of the risky asset and short rate paid for a bond are both modulated by a time-inhomogeneous Markov chain, with transition probabilities dependent on states, time, and asset prices. To do this, we first f...

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Bibliographic Details
Main Authors: Benjamín Vallejo-Jiménez, Francisco Venegas-Martínez, Oscar V. De la Torre-Torres, José Álvarez-García
Format: Article
Language:English
Published: MDPI AG 2022-08-01
Series:Mathematics
Subjects:
diffusion process
short rate
Markov regime switching
portfolio simulation
Online Access:https://www.mdpi.com/2227-7390/10/16/2926

Internet

https://www.mdpi.com/2227-7390/10/16/2926

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