Our goal is to resolve a problem proposed by Fernholz and Karatzas [On optimal arbitrage (2008) Columbia Univ.]: to characterize the minimum amount of initial capital with which an investor can beat the market portfolio with a certain probability, as a function of the market configuration and time to maturity. We show that this value function is the smallest nonnegative viscosity supersolution of a nonlinear PDE. As in Fernholz and Karatzas [On optimal arbitrage (2008) Columbia Univ.], we do not assume the existence of an equivalent local martingale measure, but merely the existence of a local martingale deflator.
Erhan Bayraktar. Yu-Jui Huang. Qingshuo Song. "Outperforming the market portfolio with a given probability." Ann. Appl. Probab. 22 (4) 1465 - 1494, August 2012. https://doi.org/10.1214/11-AAP799