Utility maximization in incomplete markets with default
Computational Finance
2010-07-13 v3 Optimization and Control
Probability
Portfolio Management
Abstract
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic programming, we characterize the value function with a backward stochastic differential equation and the optimal portfolio policies. We separately treat the cases of exponential, power and logarithmic utility.
Keywords
Cite
@article{arxiv.0811.4715,
title = {Utility maximization in incomplete markets with default},
author = {Thomas Lim and Marie-Claire Quenez},
journal= {arXiv preprint arXiv:0811.4715},
year = {2010}
}