A GENERAL OPTIMAL INVESTMENT MODEL IN THE PRESENCE OF BACKGROUND RISK
2016 ◽
Vol 11
(01)
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pp. 1650001
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Keyword(s):
In this paper we present two dynamic models of background risk. We first present a stochastic factor model with an additive background risk. Then, we present a dynamic model of simultaneous (correlated) multiplicative background risk and additive background risk. In so doing, we use a general utility function.