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http://bura.brunel.ac.uk/handle/2438/12370
Title: | Risk-sensitive control for a class of nonlinear systems with multiplicative noise |
Authors: | Date, P Gashi, B |
Keywords: | Risk-sensitive control;Nonlinear systems;Bond pricing;Optimal investment |
Issue Date: | 2013 |
Publisher: | Elsevier |
Citation: | Systems and Control Letters, 62(10): pp. 988 - 999, (2013) |
Abstract: | In this paper, we consider the problem of optimal control for a class of nonlinear stochastic systems with multiplicative noise. The nonlinearity consists of quadratic terms in the state and control variables. The optimality criteria are of a risk-sensitive and generalised risk-sensitive type. The optimal control is found in an explicit closed-form by the completion of squares and the change of measure methods. As applications, we outline two special cases of our results. We show that a subset of the class of models which we consider leads to a generalised quadratic-affine term structure model (QATSM) for interest rates. We also demonstrate how our results lead to generalisation of exponential utility as a criterion in optimal investment. © 2013 Elsevier B.V. All rights reserved. |
URI: | http://www.sciencedirect.com/science/article/pii/S0167691113001667 http://bura.brunel.ac.uk/handle/2438/12370 |
DOI: | http://dx.doi.org/10.1016/j.sysconle.2013.07.007 |
ISSN: | 0167-6911 |
Appears in Collections: | Dept of Mathematics Research Papers |
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