Minimizing the Expected Market Time to Reach a Certain Wealth Level

DOI10.1137/080741124MaRDI QIDQ3402358zbMATH OpenOpenAlexFDO

Authors Constantinos Kardaras, Eckhard Platen

Publication date 3 February 2010

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0904.1903

zbMATH Keywords

exponential Lévy marketsgrowth-optimal portfolioItô marketsmarket timenuméraire portfolioovershootsemimartingale marketsupcrossing

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30) Stochastic models in economics (91B70)

Abstract: In a financial market model, we consider variations of the problem of minimizing the expected time to upcross a certain wealth level. For exponential Levy markets, we show the asymptotic optimality of the growth-optimal portfolio for the above problem and obtain tight bounds for the value function for any wealth level. In an Ito market, we employ the concept of market time, which is a clock that runs according to the underlying market growth. We show the optimality of the growth-optimal portfolio for minimizing the expected market time to reach any wealth level. This reveals a general definition of market time which can be useful from an investor's point of view. We utilize this last definition to extend the previous results in a general semimartingale setting.

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