DocumentCode
2257234
Title
Optimal terminal wealth under partial information: Both the drift and the volatility driven by a discrete time Markov chain
Author
Taksar, Michael ; Zeng, Xudong
Author_Institution
Dept. of Math., Univ. of Missouri, Columbia, MO, USA
fYear
2008
fDate
9-11 Dec. 2008
Firstpage
257
Lastpage
262
Abstract
We consider a multi-stock market model. The stock price process satisfies a stochastic differential equation where both the drift and the volatility are driven by a discrete-time Markov chain of finite states. Not only the underlying Brownian motion but also the Markov chain in the stochastic differential equation are assumed to be unobservable. Investors can observe the stock price process only. The main result of this paper is that we derive the approximation of the optimal trading strategy and the corresponding optimal expected utility function from terminal wealth.
Keywords
Brownian motion; Markov processes; approximation theory; differential equations; discrete time systems; optimisation; pricing; share prices; stock markets; utility theory; Brownian motion; discrete time finite state Markov chain; multistock market model; optimal expected utility function; optimal terminal wealth; optimal trading strategy approximation; partial information; stochastic differential equation; stock price; Differential equations; Hidden Markov models; Information filtering; Mathematics; Optimal control; Optimization methods; Portfolios; Solid modeling; Stochastic processes; Utility theory;
fLanguage
English
Publisher
ieee
Conference_Titel
Decision and Control, 2008. CDC 2008. 47th IEEE Conference on
Conference_Location
Cancun
ISSN
0191-2216
Print_ISBN
978-1-4244-3123-6
Electronic_ISBN
0191-2216
Type
conf
DOI
10.1109/CDC.2008.4739491
Filename
4739491
Link To Document