CXO

Admissible Strategies In Semimartingale Portfolio Selection

Date Added: Aug 2010
Format: PDF

The choice of admissible trading strategies in mathematical modeling of financial markets is a delicate issue, going back to Harrison and Kreps [HK79]. In the context of optimal portfolio selection with expected utility preferences this question has been the focus of considerable attention over the last twenty years. The authors propose a novel notion of admissibility that has many pleasant features - admissibility is characterized purely under the objective measure P; each admissible strategy can be approximated by simple strategies using finite number of trading dates.