Year: 2014
Type: preprint
Abstract: Long term optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal strategy converge to their long-run counterparts as the investment horizon approaches infinity. This convergence also yields portfolio turnpikes for general utilities. By using results on large time behaviour of semi-linear partial differential equations, our analysis extends affine models, where the Wishart process drives investment opportunities, to a non-affine setting. Furthermore, in the affine setting, an example is constructed where the value function is not exponentially affine, in contrast to models with vector-valued state variables.
Source: arXiv (Cornell University)
Authors: Robertson, Scott, Xing, Hao
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2950076827