The continuous behavior of the numéraire portfolio under small changes in information structure, probabilistic views and investment constraints
The numéraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numéraire portfolio depends on market characteristics, which include: (a) the information flow available to acting agents, given by a filtration; (b) the statistical evolution of the asset prices and, more generally, the states of nature, given by a probability measure; and (c) possible restrictions that acting agents might be facing on available investment strategies, modeled by a constraint set. In a financial market with continuous-path asset prices, we establish the stable behavior of the numéraire portfolio when each of the aforementioned market parameters is changed in an infinitesimal way.
Year of publication: |
2010
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Authors: | Kardaras, Constantinos |
Published in: |
Stochastic Processes and their Applications. - Elsevier, ISSN 0304-4149. - Vol. 120.2010, 3, p. 331-347
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Publisher: |
Elsevier |
Keywords: | Information Investment constraints Log-utility maximization Mathematical finance Numeraire portfolio Semimartingales Stability Well-posed problems |
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