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Limited Attention Allocation in a Stochastic Linear Quadratic System with Multiplicative Noise

Published 27 Mar 2024 in math.OC and q-fin.MF | (2403.18528v1)

Abstract: This study addresses limited attention allocation in a stochastic linear quadratic system with multiplicative noise. Our approach enables strategic resource allocation to enhance noise estimation and improve control decisions. We provide analytical optimal control and propose a numerical method for optimal attention allocation. Additionally, we apply our ffndings to dynamic mean-variance portfolio selection, showing effective resource allocation across time periods and factors, providing valuable insights for investors.

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