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arxiv: 0912.1883 · v3 · pith:UBPWONLZnew · submitted 2009-12-09 · 💱 q-fin.PM · cs.SY· math.OC· math.PR· q-fin.CP

The Bellman equation for power utility maximization with semimartingales

classification 💱 q-fin.PM cs.SYmath.OCmath.PRq-fin.CP
keywords equationbellmanutilitymaximizationoptimalpowersolutioncharacterized
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We study utility maximization for power utility random fields with and without intermediate consumption in a general semimartingale model with closed portfolio constraints. We show that any optimal strategy leads to a solution of the corresponding Bellman equation. The optimal strategies are described pointwise in terms of the opportunity process, which is characterized as the minimal solution of the Bellman equation. We also give verification theorems for this equation.

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