Publication:
Portfolio selection in stochastic markets with exponential utility functions

dc.contributor.departmentDepartment of Industrial Engineering
dc.contributor.departmentGraduate School of Social Sciences and Humanities
dc.contributor.kuauthorÇanakoğlu, Ethem
dc.contributor.kuauthorÖzekici, Süleyman
dc.contributor.schoolcollegeinstituteCollege of Engineering
dc.contributor.schoolcollegeinstituteGRADUATE SCHOOL OF SOCIAL SCIENCES AND HUMANITIES
dc.date.accessioned2024-11-09T22:59:48Z
dc.date.issued2009
dc.description.abstractWe consider the optimal portfolio selection problem in a multiple period setting where the investor maximizes the expected utility of the terminal wealth in a stochastic market. The utility function has an exponential structure and the market states change according to a Markov chain. The states of the market describe the prevailing economic, financial, social and other conditions that affect the deterministic and probabilistic parameters of the model. This includes the distributions of the random asset returns as well as the utility function. The problem is solved using the dynamic programming approach to obtain the optimal solution and an explicit characterization of the optimal policy. We also discuss the stochastic structure of the wealth process under the optimal policy and determine various quantities of interest including its Fourier transform. The exponential return-risk frontier of the terminal wealth is shown to have a linear form. Special cases of multivariate normal and exponential returns are disussed together with a numerical illustration.
dc.description.indexedbyWOS
dc.description.indexedbyScopus
dc.description.issue1
dc.description.openaccessNO
dc.description.sponsoredbyTubitakEuN/A
dc.description.volume166
dc.identifier.doi10.1007/s10479-008-0406-2
dc.identifier.eissn1572-9338
dc.identifier.issn0254-5330
dc.identifier.scopus2-s2.0-58149503637
dc.identifier.urihttps://doi.org/10.1007/s10479-008-0406-2
dc.identifier.urihttps://hdl.handle.net/20.500.14288/7959
dc.identifier.wos262310400018
dc.keywordsPortfolio optimization
dc.keywordsDynamic programming
dc.keywordsExponential utility
dc.keywordsExponential frontier
dc.keywordsEfficient frontier
dc.keywordsDiscrete-Time
dc.keywordsOptimal consumption
dc.keywordsOptimization
dc.keywordsModels
dc.keywordsMaximization
dc.language.isoeng
dc.publisherSpringer
dc.relation.ispartofAnnals Of Operations Research
dc.subjectOperations research
dc.subjectManagement science
dc.titlePortfolio selection in stochastic markets with exponential utility functions
dc.typeConference Proceeding
dspace.entity.typePublication
local.contributor.kuauthorÇanakoğlu, Ethem
local.contributor.kuauthorÖzekici, Süleyman
local.publication.orgunit1GRADUATE SCHOOL OF SOCIAL SCIENCES AND HUMANITIES
local.publication.orgunit1College of Engineering
local.publication.orgunit2Department of Industrial Engineering
local.publication.orgunit2Graduate School of Social Sciences and Humanities
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