On dynamic deviation measures and continuous-time portfolio optimization
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Abstract: In this paper we propose the notion of dynamic deviation measure, as a dynamic time-consistent extension of the (static) notion of deviation measure. To achieve time-consistency we require that a dynamic deviation measures satisfies a generalised conditional variance formula. We show that, under a domination condition, dynamic deviation measures are characterised as the solutions to a certain class of backward SDEs. We establish for any dynamic deviation measure an integral representation, and derive a dual characterisation result in terms of additively -stable dual sets. Using this notion of dynamic deviation measure we formulate a dynamic mean-deviation portfolio optimisation problem in a jump-diffusion setting and identify a subgame-perfect Nash equilibrium strategy that is linear as function of wealth by deriving and solving an associated extended HJB equation.
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(7)- scientific article; zbMATH DE number 7224244 (Why is no real title available?)
- Expected utility maximization and conditional value-at-risk deviation-based Sharpe ratio in dynamic stochastic portfolio optimization.
- Constrained utility deviation-risk optimization and time-consistent HJB equation
- Dynamic Optimization of Investment Portfolio under Liquidity with Taylor Extension of Value function
- Portfolio optimization under dynamic risk constraints: continuous vs. discrete time trading
- On dynamic spectral risk measures, a limit theorem and optimal portfolio allocation
- Optimality conditions in portfolio analysis with general deviation measures
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