We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian motions with the coefficients depending on an economic factor, possibly nonlinearly. The bound is tight so that there exists a portfolio that optimises the decay rate. That portfolio is also risk-sensitive optimal .
We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian motions with the coefficients depending on an economic factor, possibly nonlinearly. The economic factor is modelled with a general Ito equation. The bound is shown to be tight. More specifically, epsilon-optimal portfolios are obtained under additional conditions .
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bound is tight so that there exists a portfolio that optimises the decay rate. That portfolio is also risk-sensitive optimal
economic factor is modelled with a general Ito equation. The bound is shown to be tight. More specifically, epsilon-optimal portfolios are obtained under additional conditions