Optimal Investment Strategy to Minimize Occupation Time
Portfolio Management
2008-12-02 v3 Optimization and Control
Probability
Abstract
We find the optimal investment strategy to minimize the expected time that an individual's wealth stays below zero, the so-called {\it occupation time}. The individual consumes at a constant rate and invests in a Black-Scholes financial market consisting of one riskless and one risky asset, with the risky asset's price process following a geometric Brownian motion. We also consider an extension of this problem by penalizing the occupation time for the degree to which wealth is negative.
Cite
@article{arxiv.0805.3981,
title = {Optimal Investment Strategy to Minimize Occupation Time},
author = {Erhan Bayraktar and Virginia R. Young},
journal= {arXiv preprint arXiv:0805.3981},
year = {2008}
}
Comments
Occupation time, optimal investment, stochastic control, free-boundary problem