Utility maximization in incomplete markets with default
Abstract
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic programming, we characterize the value function with a backward stochastic differential equation and the optimal portfolio policies. We separately treat the cases of exponential, power and logarithmic utility.
- Publication:
-
arXiv e-prints
- Pub Date:
- November 2008
- DOI:
- 10.48550/arXiv.0811.4715
- arXiv:
- arXiv:0811.4715
- Bibcode:
- 2008arXiv0811.4715L
- Keywords:
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- Quantitative Finance - Computational Finance;
- Mathematics - Optimization and Control;
- Mathematics - Probability;
- Quantitative Finance - Portfolio Management