Robust portfolio selection under exponential preferences

Dariusz Zawisza

Applicationes Mathematicae (2010)

  • Volume: 37, Issue: 2, page 215-230
  • ISSN: 1233-7234

Abstract

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We consider an incomplete market with an untradable stochastic factor and a robust investment problem based on the CARA utility. We formulate it as a stochastic differential game problem, and use Hamilton-Jacobi-Bellman-Isaacs equations to derive an explicit representation of the robust optimal portfolio; the HJBI equation is transformed using a substitution of the Cole-Hopf type. Not only the pure investment problem, but also a problem of robust hedging is taken into account: an agent tries to hedge the risk associated with derivatives based on the stochastic factor.

How to cite

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Dariusz Zawisza. "Robust portfolio selection under exponential preferences." Applicationes Mathematicae 37.2 (2010): 215-230. <http://eudml.org/doc/279913>.

@article{DariuszZawisza2010,
abstract = {We consider an incomplete market with an untradable stochastic factor and a robust investment problem based on the CARA utility. We formulate it as a stochastic differential game problem, and use Hamilton-Jacobi-Bellman-Isaacs equations to derive an explicit representation of the robust optimal portfolio; the HJBI equation is transformed using a substitution of the Cole-Hopf type. Not only the pure investment problem, but also a problem of robust hedging is taken into account: an agent tries to hedge the risk associated with derivatives based on the stochastic factor.},
author = {Dariusz Zawisza},
journal = {Applicationes Mathematicae},
keywords = {CARA utility; Hamilton-Jacobi-Bellman-Isaac equation; differential game},
language = {eng},
number = {2},
pages = {215-230},
title = {Robust portfolio selection under exponential preferences},
url = {http://eudml.org/doc/279913},
volume = {37},
year = {2010},
}

TY - JOUR
AU - Dariusz Zawisza
TI - Robust portfolio selection under exponential preferences
JO - Applicationes Mathematicae
PY - 2010
VL - 37
IS - 2
SP - 215
EP - 230
AB - We consider an incomplete market with an untradable stochastic factor and a robust investment problem based on the CARA utility. We formulate it as a stochastic differential game problem, and use Hamilton-Jacobi-Bellman-Isaacs equations to derive an explicit representation of the robust optimal portfolio; the HJBI equation is transformed using a substitution of the Cole-Hopf type. Not only the pure investment problem, but also a problem of robust hedging is taken into account: an agent tries to hedge the risk associated with derivatives based on the stochastic factor.
LA - eng
KW - CARA utility; Hamilton-Jacobi-Bellman-Isaac equation; differential game
UR - http://eudml.org/doc/279913
ER -

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