Is there an increase in utility by including stochastic diffusion processes in portfolio strategies? A Shapley Value analysis

Ponente(s): Benjamín Vallejo Jiménez, Renato Francisco González Sánchez, Miguel Ángel Tinoco Zermeño
The inclusion of new types of risks arises as the natural next step in order to avoid possible risk overestimation on classic models, never the less, this work presents specific conditions that may lead us to refuse this inclusion. This research extends Vallejo et al. (2015) by applying the Shapley Value method to evaluate the increment in utility due the changes in optimal portfolio decision, to maximize total discounted logarithmic utility, by the consideration of a risky asset driven by a Time-Inhomogeneous Markov Modulated diffusion process.