Optimal Portfolios in Commodity Futures Markets

21 Pages Posted: 12 Apr 2012

See all articles by Fred Espen Benth

Fred Espen Benth

University of Oslo

Jukka Lempa

University of Oslo - Department of Mathematics

Date Written: April 11, 2012

Abstract

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

Suggested Citation

Benth, Fred Espen and Lempa, Jukka, Optimal Portfolios in Commodity Futures Markets (April 11, 2012). Available at SSRN: https://ssrn.com/abstract=2038310 or http://dx.doi.org/10.2139/ssrn.2038310

Fred Espen Benth

University of Oslo ( email )

Center of Mathematics for Applications
Oslo, N-0317
Norway

Jukka Lempa (Contact Author)

University of Oslo - Department of Mathematics ( email )

Blindern, N-0162, Os
Norway

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