The G-Martingale Approach for G-Utility Maximization

arXiv2206.05991MaRDI QIDQ6401883FDOQ6401883

Authors: Q.-G. Chen, Yulin Song, ZengWu Wang, Zengting Yuan 

Publication date: 13 June 2022

Abstract: In this paper, we study representative investor's G-utility maximization problem by G-martingale approach in the framework of G-expectation space proposed by Peng cite{Pe19}. Financial market has only a bond and a stock with uncertainty characterized by G-Brownian motions. The routine idea of cite{Wxz} fails because that the quadratic variation process of a G-Brownian motion is also a stochastic process. To overcome this difficulty, an extended nonlinear expectation should be pulled in. A sufficient condition of G-utility maximization is presented firstly. In the case of log-utility, an explicit solution of optimal strategy can be obtained by constructing and solving a couple of G-FBSDEs, then verifying the optimal strategy to meet the sufficient condition. As an application, an explicit solution of a stochastic interest model is obtained by the same approach. All economic meanings of optimal strategies are consistent with our intuitions.

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