- TITLE: Entropic Risk Constraints for Utility Maximization.
- AUTHOR: Birgit Rudloff, J. Sass, R. Wunderlich
- ABSTRACT: We consider the optimal selection of portfolios for utility
maximizing investors under joint budget and risk constraints. The
risk is measured in terms of entropic risk which is a convex risk measure. Stock returns
satisfy a stochastic differential equation where we assume partial
information on the drift. Under general conditions on the
corresponding drift process we provide the optimal trading strategy
using Malliavin calculus. We give numerical results for power
utility and a model where the drift is a Markov process with
finitely many states.
- STATUS: In: Chr. Tammer, F. Heyde (eds.):
Festschrift in Celebration of Prof. Dr. Wilfried Grecksch's 60th Birthday. Shaker Verlag, Aachen, 149 - 180, 2008.
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