Robust maximization of asymptotic growth under covariance uncertainty
Abstract
This paper resolves a question proposed in Kardaras and Robertson [Ann. Appl. Probab. 22 (2012) 1576-1610]: how to invest in a robust growth-optimal way in a market where precise knowledge of the covariance structure of the underlying assets is unavailable. Among an appropriate class of admissible covariance structures, we characterize the optimal trading strategy in terms of a generalized version of the principal eigenvalue of a fully nonlinear elliptic operator and its associated eigenfunction, by slightly restricting the collection of nondominated probability measures.
Keywords
Cite
@article{arxiv.1107.2988,
title = {Robust maximization of asymptotic growth under covariance uncertainty},
author = {Erhan Bayraktar and Yu-Jui Huang},
journal= {arXiv preprint arXiv:1107.2988},
year = {2013}
}
Comments
Published in at http://dx.doi.org/10.1214/12-AAP887 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)