CRRA Utility Maximization under Risk Constraints

MaRDI QIDQ6225907zbMATH OpenFDO

Authors Santiago Moreno-Bromberg, Traian A. Pirvu, Anthony Réveillac

Publication date 9 June 2011

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Abstract: This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the prices of financial assets are modeled by It^o processes. The dynamic risk constraints, which are time and state dependent, are generated by risk measures. Optimal trading strategies are characterized by a quadratic BSDE. Within the class of extit{time consistent distortion risk measures}, a three-fund separation result is established. Numerical results emphasize the effects of imposing risk constraints on trading.

This page was built for publication: CRRA Utility Maximization under Risk Constraints

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6225907)