Portfolio Choice with Stochastic Investment Opportunities: a User's Guide
Portfolio Management
2013-11-08 v1 Optimization and Control
Abstract
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using tools from stochastic control, and how to rigorously verify their optimality by means of convex duality. Special emphasis is placed on long-horizon asymptotics, that lead to particularly tractable results.
Keywords
Cite
@article{arxiv.1311.1715,
title = {Portfolio Choice with Stochastic Investment Opportunities: a User's Guide},
author = {Ren Liu and Johannes Muhle-Karbe},
journal= {arXiv preprint arXiv:1311.1715},
year = {2013}
}
Comments
31 pages, 4 figures