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Risk Sensitive Control of the Lifetime Ruin Problem

28 Pages Posted: 22 Mar 2015  

Erhan Bayraktar

University of Michigan at Ann Arbor - Department of Mathematics

Asaf Cohen

University of Michigan at Ann Arbor - Department of Mathematics

Date Written: March 20, 2015

Abstract

We study a risk sensitive control version of the lifetime ruin probability problem. We consider a sequence of investments problems in Black-Scholes market that includes a risky asset and a riskless asset. We present a differential game that governs the limit behavior. We solve it explicitly and use it in order to find an asymptotically optimal policy.

Keywords: Probability of lifetime ruin, optimal investment, risk sensitive control, large deviations, differential games

Suggested Citation

Bayraktar, Erhan and Cohen, Asaf, Risk Sensitive Control of the Lifetime Ruin Problem (March 20, 2015). Available at SSRN: https://ssrn.com/abstract=2581543 or http://dx.doi.org/10.2139/ssrn.2581543

Erhan Bayraktar (Contact Author)

University of Michigan at Ann Arbor - Department of Mathematics ( email )

2074 East Hall
530 Church Street
Ann Arbor, MI 48109-1043
United States

Asaf Cohen

University of Michigan at Ann Arbor - Department of Mathematics ( email )

2074 East Hall
530 Church Street
Ann Arbor, MI 48109-1043
United States

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