Optimal portfolio formulas for some mean-reverting price models

Srdjan Stojanovic ()
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Srdjan Stojanovic: Department of Mathematical Sciences, University of Cincinnati, Cincinnati, Ohio 45221, USA;

Journal of Financial Engineering (JFE), 2014, vol. 01, issue 02, 1-19

Abstract: Merton's optimal portfolio problem is solved, i.e., optimal portfolio formulas are derived for some new underlying price models of mean reversion type. The mean-reversion price models are proposed as an alternative to the well-known log-normal type and related models, possibly for a situation when an investor has a strong point of view about the future price-evolution.

Keywords: Merton's problem; portfolio optimization; mean-reversion; CRRA utility of wealth; SDEs; PDEs; ODEs (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1142/S2345768614500147

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