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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… Click to show full 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.
Keywords:
expansion;
context utility;
utility maximization;
model space;
space context;
expansion model
Journal Title: Finance and Stochastics
Year Published: 2018
Link to full text (if available)
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Journal Title: Finance and Stochastics
Year Published: 2018
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!