Robust maximization of asymptotic growth

Constantinos Kardaras and Scott Robertson

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized version of the principal eigenfunction for an elliptic second-order differential operator which depends on the covariance structure of the underlying process used for investing. The robust growth-optimal strategy can also be seen as a limit, as the terminal date goes to infinity, of optimal arbitrages in the terminology of Fernholz and Karatzas.

Keywords: asymptotic growth rate; robustness; generalized martingale problem; optimal arbitrage (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2012-10
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Citations: View citations in EconPapers (8)

Published in Annals of Applied Probability, October, 2012, 22(4), pp. 1576-1610. ISSN: 1050-5164

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