Robust maximization of asymptotic growth under covariance uncertainty

DOI10.1214/12-AAP887zbMATH Open1287.60081arXiv1107.2988OpenAlexW3121619238MaRDI QIDQ373833FDOQ373833

Authors: Erhan Bayraktar, Yu-Jui Huang 

Publication date: 25 October 2013

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: This paper resolves a question proposed in Kardaras and Robertson [Ann. Appl. Probab. 22 (2012) 1576-1610]: how to invest in a robust growth-optimal way in a market where precise knowledge of the covariance structure of the underlying assets is unavailable. Among an appropriate class of admissible covariance structures, we characterize the optimal trading strategy in terms of a generalized version of the principal eigenvalue of a fully nonlinear elliptic operator and its associated eigenfunction, by slightly restricting the collection of nondominated probability measures.

Full work available at URL: https://arxiv.org/abs/1107.2988

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zbMATH Keywords

asymptoticgrowth ratecontinuous selectionminmaxsmooth domainsolution of martingale problemviscosity sense

Mathematics Subject Classification ID

Optimality conditions for minimax problems (49K35) Martingales with continuous parameter (60G44) Stochastic integrals (60H05) Stochastic integral equations (60H20) Nonlinear spectral theory, nonlinear eigenvalue problems (47J10)

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Cited In (6)

• Robust asymptotic growth in stochastic portfolio theory under long‐only constraints
• Ergodic robust maximization of asymptotic growth
• Robust Markowitz mean‐variance portfolio selection under ambiguous covariance matrix
• Utility maximization under model uncertainty in discrete time
• Robust maximization of asymptotic growth
• Optimal long term investment under model ambiguity.

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