Portfolio turnpikes state that as the investment horizon increases, optimal portfolios for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turnpikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs and portfolios converge under their myopic probabilities. In diffusion models with several assets and a single state variable, the classic turnpike demonstrates that optimal portfolios converge under the physical probability. In the same setting, the explicit turnpike identifies the limit of finite-horizon optimal portfolios as a long-run myopic portfolio defined in terms of the solution of an ergodic HJB equation.
Abstract, classic, and explicit turnpikes / Guasoni P; Kardaras C; Robertson S; Xing H. - In: FINANCE AND STOCHASTICS. - ISSN 0949-2984. - STAMPA. - 18:1(2014), pp. 75-114. [10.1007/s00780-013-0216-5]
Abstract, classic, and explicit turnpikes
Guasoni PCo-primo
;
2014
Abstract
Portfolio turnpikes state that as the investment horizon increases, optimal portfolios for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turnpikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs and portfolios converge under their myopic probabilities. In diffusion models with several assets and a single state variable, the classic turnpike demonstrates that optimal portfolios converge under the physical probability. In the same setting, the explicit turnpike identifies the limit of finite-horizon optimal portfolios as a long-run myopic portfolio defined in terms of the solution of an ergodic HJB equation.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.