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Mathematical Finance and Probability Seminars

"SENSITIVITY ANALYSIS OF THE UTILITY MAXIMIZATION PROBLEM WITH RESPECT TO MODEL PERTURBATIONS"

Oleksii Mostovyi, University of Connecticut

Location:  HILL 705
Date & time: Tuesday, 25 April 2017 at 11:45AM -

 

Abstract: We study the sensitivity of the expected utility maximization problem in a continuous semimartingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled with a general utility function, we obtain a second-order expansion of the value function, a first-order approximation of the terminal wealth, and construct trading strategies that match the indirect utility function up to the second order. f a risk-tolerance wealth process exists, using it as a numeraire and under an appropriate change of measure, we reduce the approximation problem to a Kunita-Watanabe decomposition.

This talk is based on the joint work with Mihai Sirbu.

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Department of Mathematics

Department of Mathematics
Rutgers University
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