Many investors do not know with certainty when their portfolio will be liquidated. Should their portfolio selection be influenced by the uncertainty of exit time? In order to answer this question, we consider a suitable extension of the familiar optimal investment problem of Merton [Merton,...

We construct risk-minimizing hedging strategies in the case where there are restrictions on the available information. the underlying price process is a "d"-dimensional F-martingale, and strategies &phis;= (ϑ, η) are constrained to have η G-predictable and η G'-adapted for filtrations η G C G'C...

This paper studies a class of diffusion models for stock prices derived by a microeconomic approach. We consider discrete-time processes resulting from a market equilibrium and then apply an invariance principle to obtain a continuous-time model. the resulting process is an Ornstein-Uhlenbeck...

We consider a very general diffusion model for asset prices which allows the description of stochastic and past-dependent volatilities. Since this model typically yields an incomplete market, we show that for the purpose of pricing options, a small investor should use the minimal equivalent...