Quadratic BSDEs driven by a continuous martingale and applications to the utility maximization problem (Q2271730): Difference between revisions
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English | Quadratic BSDEs driven by a continuous martingale and applications to the utility maximization problem |
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Quadratic BSDEs driven by a continuous martingale and applications to the utility maximization problem (English)
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8 August 2009
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In this paper, the problem under consideration consists of maximizing the expected utility of the terminal value of a portfolio under constraints. The main objective is to give an expression for the value process \(V^B_t(x)\) of the utility maximization problem with utility function \(U\) and liability \(B\). The authors rely on the dynamic programming methodology and on nonlinear BSDE theory, and the contribution of this work consists in extending the dynamic method to a general continuous setting in the presence of constraints. This requires to establish existence and uniqueness results for solutions to specific quadratic BSDEs and then to use these results to characterize both the value process expressed at time \(t\) and the strategies attaining the supremum in the expression for \(V^B_t(x)\).
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backward stochastic differential equations (BSDEs)
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continuous filtration
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quadratic growth
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utility maximization
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portfolio constraints
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