Optimal Portfolio and Consumption in Anticipative Electricity Futures Markets
22 Pages Posted: 5 Aug 2014 Last revised: 7 Sep 2014
Date Written: September 7, 2014
Abstract
We derive utility maximizing portfolios and consumption rates in electricity futures markets under anticipative information modeled by enlarged filtrations. The emerging optimization exercises are solved by point-wise maximization and a sufficient stochastic maximum principle. We provide rigorous economical interpretation of our mathematical results and distinguish optimal trading behavior for small and large investors with insider knowledge. On the mathematical side we are concerned with jump processes, (B)SDEs, enlarged filtrations, forward integrals, stochastic maximum principles and Malliavin calculus.
Keywords: anticipative stochastic calculus, enlargement of filtration, forward integral, insider trading, forward-looking information, electricity futures market, portfolio selection, consumption rates, utility maximization
JEL Classification: C00, D52, D81, D82, G11, G13
Suggested Citation: Suggested Citation