A control approach to robust utility maximization with logarithmic utility and time-consistent penalties (Q2372460): Difference between revisions

The authors follow a stochastic control approach to solve a dynamic maximization problem of robust utility functionals. These functionals are written in terms of the logarithmic utility and a dynamically consistent convex risk measure. The underlying market is incomplete and is modeled by a diffusion process with coefficients that are driven by an external stochastic factor process that cannot be traded directly. The paper provides conditions on the minimal penalty function of the robust utility functional that help to associate the value function with the unique classical solution of a quasi-linear partial differential equation within a function type that satisfy certain growth prescripts. Also, the authors provide examples to illustrate some of the main results in the paper.