FBSDE approach to utility portfolio selection in a market with random parameters

René Ferland and François Watier

Statistics & Probability Letters, 2008, vol. 78, issue 4, 426-434

Abstract: A continuous-time utility portfolio selection problem is studied in a market in which the interest rate, appreciation rates and volatility coefficients are driven by Brownian motion. We construct an optimal portfolio using results from forward-backward stochastic differential equations (FBSDE) theory. As an illustration, exact computation of the optimal strategy is done for the power and exponential type utilities.

Keywords: Expected; utility; maximization; Optimal; portfolio; Forward-backward; stochastic; differential; equations (search for similar items in EconPapers)
Date: 2008
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