Non-smooth analysis method in optimal investment- a BSDE approach
Helin Wu, Yong Ren
TL;DR
This paper develops a non-smooth analysis approach using BSDEs to derive necessary conditions for optimal investment strategies, accommodating general constraints on wealth and portfolios.
Contribution
It introduces a novel non-smooth analysis method within the BSDE framework to handle broad constraints in optimal investment problems.
Findings
Derived necessary optimality conditions for constrained investment models
Extended BSDE methods to non-smooth, constrained settings
Provided a flexible analytical framework for complex investment problems
Abstract
In this paper, our aim is to investigate necessary conditions for optimal investment. We model the wealth process by Backward differential stochastic equations (shortly for BSDE) with or without constraints on wealth and portfolio process. The constraints can be very general thanks the non-smooth analysis method we adopted.
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Taxonomy
TopicsStochastic processes and financial applications · Risk and Portfolio Optimization · Economic theories and models