Horizon dependence of utility optimizers in incomplete models
نویسندگان
چکیده
The utility maximization of terminal wealth in continuous time has a long history. Literally hundreds of papers have studied many facets of such questions. Despite of the vast amount of literature, one aspect seems not well understood to date. That is the stability of the optimizers. To the best of my knowledge, only a few papers have been published on this topic, such as [3] and [21]. This document contains a paper that I participated in during my PhD research at Carnegie Mellon University. In this paper we studied the stability problem in time horizon of utility maximization in incomplete models. The question we were interested in was how the planning horizon affected the optimal investment decision. A shorter version of this thesis has been accepted for publication (jointly with my advisor Kasper Larsen) in Finance & Stochastics. The main contribution of this work is that we identified the models that fail to be stable and we also provided conditions preventing the existence of this phenomenon.
منابع مشابه
Power utility maximization in exponential Lévy models: convergence of discrete-time to continuous-time maximizers
We consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Lévy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid. Under minimal assumptions we prove convergence of the optimal discrete-time strategies to the continuous-time counterpart. In addition, we provide and compa...
متن کاملIndifference valuation in incomplete binomial models∗
The indifference valuation problem in incomplete binomial models is analyzed. The model is general in that the stochastic factor which generates the marlet incompleteness may affect the transition propabilities and/or the values of the traded asset as well as the claim’s payoff. Two pricing algorithms are constructed which use, respectively, the minimal martingale and minimal entropy measures. ...
متن کاملEnergy Scheduling in Power Market under Stochastic Dependence Structure
Since the emergence of power market, the target of power generating utilities has mainly switched from cost minimization to revenue maximization. They dispatch their power energy generation units in the uncertain environment of power market. As a result, multi-stage stochastic programming has been applied widely by many power generating agents as a suitable tool for dealing with self-scheduling...
متن کاملFuzzy Random Utility Choice Models: The Case of Telecommuting Suitability
Random utility models have been widely used in many diverse fields. Considering utility as a random variable opened many new analytical doors to researchers in explaining behavioral phenomena. Introducing and incorporating the random error term into the utility function had several reasons, including accounting for unobserved variables. This paper incorporates fuzziness into random utility mode...
متن کاملLong Horizon versus Short Horizon Planning in Dynamic Optimization Problems with Incomplete Information
This paper compares the implications of short and long horizon planning in dynamic optimization problems with the structure of a standard one-sector growth model if agents have incomplete knowledge about the production function. Agents know the output and rate of return at the current capital stock and use an estimation of the production function based on this knowledge to determine current con...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
- Finance and Stochastics
دوره 16 شماره
صفحات -
تاریخ انتشار 2012