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Finance and Stochastics

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14.12.2017

An expansion in the model space in the context of utility maximization

verfasst von: Kasper Larsen, Oleksii Mostovyi, Gordan Žitković

Erschienen in: Finance and Stochastics | Ausgabe 2/2018

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Abstract

In the framework of an incomplete financial market where the stock price dynamics are modeled by a continuous semimartingale (not necessarily Markovian), an explicit second-order expansion formula for the power investor’s value function—seen as a function of the underlying market price of risk process—is provided. This allows us to provide first-order approximations of the optimal primal and dual controls. Two specific calibrated numerical examples illustrating the accuracy of the method are also given.

Vorheriger Artikel A risk-neutral equilibrium leading to uncertain volatility pricing

Nächster Artikel Approximation of forward curve models in commodity markets with arbitrage-free finite-dimensional models

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Titel: An expansion in the model space in the context of utility maximization
verfasst von: Kasper Larsen
Oleksii Mostovyi
Gordan Žitković
Publikationsdatum: 14.12.2017
Verlag: Springer Berlin Heidelberg
Erschienen in: Finance and Stochastics / Ausgabe 2/2018
Print ISSN: 0949-2984
Elektronische ISSN: 1432-1122
DOI: https://doi.org/10.1007/s00780-017-0353-3

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