Optimal Portfolios in Commodity Futures Markets
21 Pages Posted: 12 Apr 2012
Date Written: April 11, 2012
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when investing in futures contracts. We study a class of futures price curve models which admit a finite-dimensional realization. Using this, we recast the portfolio optimization problem as a finite-dimensional control problem and study its solvability.
Keywords: futures contract, commodity markets, portfolio optimization, stochastic partial differential equations, finite-dimensional realization, invariant foliation
JEL Classification: C61
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