On Robust Utility Maximization
Probability
2008-12-02 v1 Optimization and Control
Portfolio Management
Abstract
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be achieved for logartihmic utility, otherwise a cashflow should be added to the investor s wealth. The cashflow can be decomposed into the sum of an increasing and a decreasing process. The last one can be viewed as consumption. The first one is an insurance premium the agent has to pay.
Cite
@article{arxiv.math/0702727,
title = {On Robust Utility Maximization},
author = {Traian A Pirvu and Ulrich G Haussmann},
journal= {arXiv preprint arXiv:math/0702727},
year = {2008}
}