Portfolio optimization with stochastic volatilities and constraints: an application in high dimension (Q2471704)

The author considers an investment problem with stochastic volatilities and portfolio constraints on amounts. The risky assets are modelled by high-dimensional (\(>3\)) jump diffusion processes, and the utility function is exponential. The objective is to maximize the expected utility from the investor terminal wealth. As long as the value function is a viscosity solution of an integro-differential HJB equation, which can not be solved explicitly, the author reduces the nonlinearity of the HJB equation to a semilinear equation. The existence of a smooth solution to the latter equation is proved and a verification theorem is stated to relate the solution to the value function. The optimal investment strategy is also obtained.