Optimal solution of investment problems via linear parabolic equations generated by Kalman filter

Nikolai Dokuchaev

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Abstract: We consider optimal investment problems for a diffusion market model with non-observable random drifts that evolve as an Ito's process. Admissible strategies do not use direct observations of the market parameters, but rather use historical stock prices. For a non-linear problem with a general performance criterion, the optimal portfolio strategy is expressed via the solution of a scalar minimization problem and a linear parabolic equation with coefficients generated by the Kalman filter.

Date: 2008-04
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Citations: View citations in EconPapers (2)

Published in SIAM J. of Control and Optimization} (2005) 44, No. 4, pp. 1239-1258

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0804.4522

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