Asymptotics of robust utility maximization
For a stochastic factor model we maximize the long-term growth rate of robust expected power utility with parameter $\lambda\in(0,1)$. Using duality methods the problem is reformulated as an infinite time horizon, risk-sensitive control problem. Our results characterize the optimal growth rate, an optimal long-term trading strategy and an asymptotic worst-case model in terms of an ergodic Bellman equation. With these results we propose a duality approach to a "robust large deviations" criterion for optimal long-term investment.
|Date of creation:||Mar 2012|
|Date of revision:|
|Publication status:||Published in Annals of Applied Probability 2012, Vol. 22, No. 1, 172-212|
|Contact details of provider:|| Web page: http://arxiv.org/|
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