2018/05/27 by Oleksii Mostovyi, Mostovyi, Oleksii · 1 citation
Economics, Econometrics and Finance · Mathematics · #Economic theories and models #Financial Markets and Investment Strategies #Stochastic processes and financial applications #math.OC #math.PR #msc:91G10 #msc:93E20
paper · pdf · doi:10.48550/arxiv.1805.11427
31 pages. Theorem 4.2 is strengthened by providing corrections to optimal strategies (without a boundedness assumption). The paper is accepted in Stochastic Processes and Their Applications
arxiv created 2020/02/09 · arxiv updated 2020/02/11
In an incomplete model, where under an appropriate numéraire, the stock price process is driven by a sigma-bounded semimartingale, we investigate the behavior of the expected utility maximization problem under small perturbations of the numéraire. We establish a quadratic approximation of the value function and a first-order expansion of the terminal wealth. Relying on a description of the base return process in terms of its semimartingale characteristics, we also construct wealth processes and nearly optimal strategies that allow for matching the primal value function up to the second order. We also link perturbations of the numéraire to distortions of the finite-variation part and martingale part of the stock price return and characterize the asymptotic expansions in terms of the risk-tolerance wealth process.