Robust maximization of asymptotic growth under covariance uncertainty

Erhan Bayraktar and Yu-Jui Huang

Papers from arXiv.org

Abstract: This paper resolves a question proposed in Kardaras and Robertson [Ann. Appl. Probab. 22 (2012) 1576-1610]: how to invest in a robust growth-optimal way in a market where precise knowledge of the covariance structure of the underlying assets is unavailable. Among an appropriate class of admissible covariance structures, we characterize the optimal trading strategy in terms of a generalized version of the principal eigenvalue of a fully nonlinear elliptic operator and its associated eigenfunction, by slightly restricting the collection of nondominated probability measures.

Date: 2011-07, Revised 2013-09
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Citations: View citations in EconPapers (7)

Published in Annals of Applied Probability 2013, Vol. 23, No. 5, 1817-1840

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1107.2988

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