Optimal solution of investment problems via linear parabolic equations generated by Kalman filter
We consider optimal investment problems for a diffusion market model with non-observable random drifts that evolve as an Ito's process. Admissible strategies do not use direct observations of the market parameters, but rather use historical stock prices. For a non-linear problem with a general...
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| Format: | Journal Article |
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SIAM Publications
2005
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| Online Access: | http://hdl.handle.net/20.500.11937/25971 |
| Summary: | We consider optimal investment problems for a diffusion market model with non-observable random drifts that evolve as an Ito's process. Admissible strategies do not use direct observations of the market parameters, but rather use historical stock prices. For a non-linear problem with a general performance criterion, the optimal portfolio strategy is expressed via the solution of a scalar minimization problem and a linear parabolic equation with coefficients generated by the Kalman filter. |
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