In the framework of an incomplete financial market where the stock price dynamics are modeled by a continuous semimartingale , an explicit first-order expansion formula for the power investor's value function - seen as a function of the underlying market price of risk process - is provided and its second-order error is quantified . Two specific calibrated numerical examples illustrating the accuracy of the method are also given.
In the framework of an incomplete financial market where the stock price dynamics are modeled by a continuous semimartingale (not necessarily Markovian) an explicit second-order expansion formula for the power investor's value function - seen as a function of the underlying market price of risk process - is provided . This allows us to provide first-order approximations of the optimal primal and dual controls . Two specific calibrated numerical examples illustrating the accuracy of the method are also given.
R
, an explicit first-order
(not necessarily Markovian) an explicit second-order
R
and its second-order error is quantified
. This allows us to provide first-order approximations of the optimal primal and dual controls