Portfolio Choice with Stochastic Investment Opportunities: a User's Guide
classification
💱 q-fin.PM
math.OC
keywords
stochasticchoiceinvestmentopportunitiesportfolioasymptoticscandidatecompute
read the original abstract
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using tools from stochastic control, and how to rigorously verify their optimality by means of convex duality. Special emphasis is placed on long-horizon asymptotics, that lead to particularly tractable results.
This paper has not been read by Pith yet.
Forward citations
Cited by 1 Pith paper
-
Infinite Horizon Optimal Consumption: Intertemporal Hedging under Epstein-Zin Preferences
The value function is the unique minimizer of a functional whose Euler-Lagrange equation matches the HJB equation, with a verification theorem giving optimal policies via change of measure and BSDE uniqueness.
discussion (0)
Sign in with ORCID, Apple, or X to comment. Anyone can read and Pith papers without signing in.