Mutual Fund Theorem for Continuous Time Markets with Random Coefficients
Curtin University of Technology
July 4, 2011
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving Brownian motion, and they are supposed to be currently observable. It is shown that some weakened version of Mutual Fund Theorem holds for this market for general class of utilities; more precisely, it is shown that the supremum of expected utilities can be achieved on a sequence of strategies with a certain distribution of risky assets that does not depend on risk preferences described by different utilities.
Number of Pages in PDF File: 22
Keywords: optimal portfolio, Mutual Fund Theorem, continuous time market models
JEL Classification: D52, D81, D84, G11working papers series
Date posted: November 17, 2009 ; Last revised: July 5, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.344 seconds