An explicit formula for optimal portfolios in complete Wiener driven markets: a functional Itô calculus approach

2016/10/17 by Kristoffer Lindensjö, Lindensjö, Kristoffer
Economics, Econometrics and Finance · #Stochastic processes and financial applications #Financial Markets and Investment Strategies #Complex Systems and Time Series Analysis

paper · pdf · doi:10.48550/arxiv.1610.05018

Abstract

We consider a standard optimal investment problem in a complete financial market driven by a Wiener process and derive an explicit formula for the optimal portfolio process in terms of the vertical derivative from functional It^o calculus. An advantage with this approach compared to the Malliavin calculus approach is that it relies only on an integrability condition.

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