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Target achieving portfolio under model misspecification: quadratic optimization framework

100%

Zawisza D.

Applicationes Mathematicae

2012

tom 39

nr 4

425-443

We incorporate model uncertainty into a quadratic portfolio optimization framework. We consider an incomplete continuous time market with a non-tradable stochastic factor. Two stochastic game problems are formulated and solved using Hamilton-Jacobi-Bellman-Isaacs equations. The proof of existence and uniqueness of a solution to the resulting semilinear PDE is also provided. The latter can be used to extend many portfolio optimization results.

Robust portfolio selection under exponential preferences

100%

Zawisza D.

Applicationes Mathematicae

2010

tom 37

nr 2

215-230

We consider an incomplete market with an untradable stochastic factor and a robust investment problem based on the CARA utility. We formulate it as a stochastic differential game problem, and use Hamilton-Jacobi-Bellman-Isaacs equations to derive an explicit representation of the robust optimal portfolio; the HJBI equation is transformed using a substitution of the Cole-Hopf type. Not only the pure investment problem, but also a problem of robust hedging is taken into account: an agent tries to hedge the risk associated with derivatives based on the stochastic factor.

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2 Applicationes Mathematicae

2 Zawisza D.

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1 2010

Wyniki wyszukiwania

Target achieving portfolio under model misspecification: quadratic optimization framework

Robust portfolio selection under exponential preferences