Turnpike property and convergence rate for an investment model with general utility functions
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Publication:1623978
DOI10.1016/J.JEDC.2014.09.025zbMATH Open1402.91339arXiv1409.7802OpenAlexW2053900106MaRDI QIDQ1623978FDOQ1623978
Authors: Baojun Bian, Harry Zheng 
Publication date: 15 November 2018
Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)
Abstract: In this paper we aim to address two questions faced by a long-term investor with a power-type utility at high levels of wealth: one is whether the turnpike property still holds for a general utility that is not necessarily differentiable or strictly concave, the other is whether the error and the convergence rate of the turnpike property can be estimated. We give positive answers to both questions. To achieve these results, we first show that there is a classical solution to the HJB equation and give a representation of the solution in terms of the dual function of the solution to the dual HJB equation. We demonstrate the usefulness of that representation with some nontrivial examples that would be difficult to solve with the trial and error method. We then combine the dual method and the partial differential equation method to give a direct proof to the turnpike property and to estimate the error and the convergence rate of the optimal policy when the utility function is continuously differentiable and strictly concave. We finally relax the conditions of the utility function and provide some sufficient conditions that guarantee the turnpike property and the convergence rate in terms of both primal and dual utility functions.
Full work available at URL: https://arxiv.org/abs/1409.7802
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- Optimal investment strategy with constant absolute risk aversion utility under an extended CEV model
- Finite difference methods for the Hamilton-Jacobi-Bellman equations arising in regime switching utility maximization
- Optimal investment strategies for general utilities under dynamic elasticity of variance models
- Dual control Monte-Carlo method for tight bounds of value function under Heston stochastic volatility model
- Abstract, classic, and explicit turnpikes
- Asymptotic behavior of an optimal investment-reinsurance problem with general utility functions
- Utilitarian versus neutralitarian design of endowment fund policies
- Dual control Monte-Carlo method for tight bounds of value function in regime switching utility maximization
- Global closed-form approximation of free boundary for optimal investment stopping problems
- An optimal investment problem with nonsmooth and nonconcave utility over a finite time horizon
- A solvable time-inconsistent principal-agent problem
- Penalized schemes for Hamilton-Jacobi-Bellman quasi-variational inequalities arising in regime switching utility maximization with optimal stopping
- Solving maxmin optimization problems via population games
- Utility maximization under trading constraints with discontinuous utility
- Dynamic convex duality in constrained utility maximization
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