IDEAS home Printed from https://ideas.repec.org/a/bla/mathfi/v11y2001i4p475-494.html
   My bibliography  Save this article

A Generalized Cameron–Martin Formula with Applications to Partially Observed Dynamic Portfolio Optimization

Author

Listed:
  • Gady Zohar

Abstract

The optimal dynamic allocation problem for a Bayesian investor is addressed when the stock's drift—modeled as a linear mean‐reverting diffusion—is not observed directly but only via the measurement process. Adopting a martingale approach, an appropriate generalization of the Cameron–Martin (1945) formula then enables computation of both the optimal dynamic allocation and the value function for a general utility function, in terms of an inverse Laplace transform of an explicit expression. Moreover, closed‐form formulas are provided in the case of power utility.

Suggested Citation

  • Gady Zohar, 2001. "A Generalized Cameron–Martin Formula with Applications to Partially Observed Dynamic Portfolio Optimization," Mathematical Finance, Wiley Blackwell, vol. 11(4), pages 475-494, October.
    • Handle: RePEc:bla:mathfi:v:11:y:2001:i:4:p:475-494
    DOI: 10.1111/1467-9965.00125
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-9965.00125
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-9965.00125?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nikolai Dokuchaev, 2015. "Optimal portfolio with unobservable market parameters and certainty equivalence principle," Papers 1502.02352, arXiv.org.
    2. Herve Roche, 2004. "Optimum Consumption and Portfolio Allocations under Incomplete Information," Econometric Society 2004 Latin American Meetings 79, Econometric Society.
    3. Brendle, Simon, 2006. "Portfolio selection under incomplete information," Stochastic Processes and their Applications, Elsevier, vol. 116(5), pages 701-723, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:mathfi:v:11:y:2001:i:4:p:475-494. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.