A smooth component of the fractional Brownian motion and optimal portfolio selection

arXiv1509.06112MaRDI QIDQ6265643FDOQ6265643

Publication date: 21 September 2015

Abstract: We consider fractional Brownian motion with the Hurst parameters from (1/2,1). We found that the increment of a fractional Brownian motion can be represented as the sum of a two independent Gaussian processes one of which is smooth in the sense that it is differentiable in mean square. We consider fractional Brownian motion and stochastic integrals generated by the Riemann sums. As an example of applications, this results is used to find an optimal pre-programmed strategy in the mean-variance setting for a Bachelier type market model driven by a fractional Brownian motion.

Mathematics Subject Classification ID

Fractional processes, including fractional Brownian motion (60G22) Portfolio theory (91G10)

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