Optimal long term growth rate of expected utility of wealth

Wendell H. Fleming

102 citations0/0 files storedThe Annals of Applied Probability

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Stochastic processes and financial applications Risk and Portfolio Optimization Probability and Risk Models

Abstract

An optimal investment policy model for the long term growth of expected utility of wealth is considered. The utility function is HARA with exponent $-\infty < \gamma < 1$. The problem can be reformulated as an infinite time horizon, risk sensitive control problem. Then the dynamic programming equations for different HARA exponents and different policy constraints are studied. We obtain some estimates for the solution of each equation. This can be used to derive an optimal policy with some interesting properties.

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References

2005Controlled Markov Processes and Viscosity Solutions 1995Risk-Sensitive Control on an Infinite Time Horizon 1999Risk-Sensitive Dynamic Asset Management 1988A Diffusion Model for Optimal Portfolio Selection in the Presence of Brokerage Fees 1995On Portfolio Optimization under “Drawdown” Constraints

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