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Optimal Asset Allocation under Forward Exponential Performance Criteria

Marek Musiela and Thaleia Zariphopoulou

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This work presents a novel concept in stochastic optimization, namely, the notion of forward performance. As an application, we analyze a portfolio management problem with exponential criteria. Under minimal model assumptions we explicitly construct the forward performance process and the associated optimal wealth and asset allocations. For various model parameters, we recover a range of investment policies that correspond to distinct financial applications.

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Stewart N. Ethier, Jin Feng and Richard H. Stockbridge, eds., Markov Processes and Related Topics: A Festschrift for Thomas G. Kurtz (Beachwood, Ohio, USA: Institute of Mathematical Statistics, 2008), 285-300

First available in Project Euclid: 28 January 2009

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Copyright © 2008, Institute of Mathematical Statistics


Musiela, Marek; Zariphopoulou, Thaleia. Optimal Asset Allocation under Forward Exponential Performance Criteria. Markov Processes and Related Topics: A Festschrift for Thomas G. Kurtz, 285--300, Institute of Mathematical Statistics, Beachwood, Ohio, USA, 2008. doi:10.1214/074921708000000435.

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