Portfolio optimization under partial information and cara preferences

Alessandra Mainini; Michele Longo

Portfolio optimization under partial information and cara preferences

Alessandra Mainini, Michele Longo

Research output: Working paper

Abstract

We consider the problem of maximizing the expected utility from terminal wealth in the case of CARA preferences and when the mean return rate of the stock is an unknown nitestate random variable. We reduce the problem within a complete observation setting and then, by means of dynamic programming techniques, we explicitly solve it and compare the optimal policy with the one relative to the complete observation case.

Original language	English
Publisher	Vita e Pensiero
Number of pages	17
ISBN (Print)	978-88-343-2654-1
Publication status	Published - 2013

Keywords

Bayesian control
Hamilton-Jacobi-Bellman equation
Investment models
Partial observation

Cite this

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N2 - We consider the problem of maximizing the expected utility from terminal wealth in the case of CARA preferences and when the mean return rate of the stock is an unknown nitestate random variable. We reduce the problem within a complete observation setting and then, by means of dynamic programming techniques, we explicitly solve it and compare the optimal policy with the one relative to the complete observation case.

AB - We consider the problem of maximizing the expected utility from terminal wealth in the case of CARA preferences and when the mean return rate of the stock is an unknown nitestate random variable. We reduce the problem within a complete observation setting and then, by means of dynamic programming techniques, we explicitly solve it and compare the optimal policy with the one relative to the complete observation case.

KW - Bayesian control

KW - Hamilton-Jacobi-Bellman equation

KW - Investment models

KW - Partial observation

KW - Bayesian control

KW - Hamilton-Jacobi-Bellman equation

KW - Investment models

KW - Partial observation

UR - http://hdl.handle.net/10807/55733

M3 - Working paper

SN - 978-88-343-2654-1

BT - Portfolio optimization under partial information and cara preferences

PB - Vita e Pensiero

ER -

Portfolio optimization under partial information and cara preferences

Abstract

Keywords

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