Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25144
Authors: 
Hernández-Hernández, Daniel
Schied, Alexander
Year of Publication: 
2006
Series/Report no.: 
SFB 649 discussion paper 2006,061
Abstract: 
We propose a stochastic control approach to the dynamic maximization of robust utility functionals that are defined in terms of logarithmic utility and a dynamically consistent convex risk measure. The underlying market is modeled by a diffusion process whose coefficients are driven by an external stochastic factor process. In particular, the market model is incomplete. Our main results give conditions on the minimal penalty function of the robust utility functional under which the value function of our problem can be identified with the unique classical solution of a quasilinear PDE within a class of functions satisfying certain growth conditions. The fact that we obtain classical solutions rather than viscosity solutions is important for the use of numerical algorithms, whose applicability is demonstrated in examples.
Document Type: 
Working Paper

Files in This Item:
File
Size
488.71 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.