Robust utility maximization in a stochastic factor model

Daniel Hernández–Hernández · Alexander Schied

57 citations0/0 files storedStatistics & Risk Modeling

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

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

Abstract

SUMMARY We give an explicit PDE characterization for the solution of a robust utility maximization problem in an incomplete market model, whose volatility, interest rate process, and long-term trend are driven by an external stochastic factor process. The robust utility functional is defined in terms of a HARA utility function with negative risk aversion and a dynamically consistent coherent risk measure, which allows for model uncertainty in the distributions of both the asset price dynamics and the factor process. Our method combines two recent advances in the theory of optimal investments: the general duality theory for robust utility maximization and the stochastic control approach to the dual problem of determining optimal martingale measures.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 57 citations exist upstream.

References

1999Coherent Measures of Risk 1989Maxmin expected utility with non-unique prior 2005Controlled Markov Processes and Viscosity Solutions 2004Subjective probability and expected utility without additivity 1989Subjective Probability and Expected Utility without Additivity 2001Robust Control and Model Uncertainty 2002Stochastic Finance: An Introduction in Discrete Time 1999The asymptotic elasticity of utility functions and optimal investment in incomplete markets

Cited by

2006Risk Measures and Robust Optimization Problems 2008Optimal investment and consumption in a Black–Scholes market with Lévy-driven stochastic coefficients 2012Robust utility maximization for a diffusion market model with misspecified coefficients 2007Robust optimal control for a consumption-investment problem 2018Dynamically consistent investment under model uncertainty: the robust forward criteria 2019Pricing and hedging in incomplete markets with model uncertainty

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.