This paper investigates theoretical and practical aspects of options that are based upon two or more assets which are co-integrated. For this purpose, a new, discrete-time model of asset prices is developed, a model featuring both the co-integration property as well as stochastic volatilities....

This paper presents an application of risk sensitive control theory in financial decision making. A variation of Merton's continuous-time intertemporal capital asset pricing model is developed where the infinite horizon objective is to maximize the portfolio's risk adjusted growth rate. The...