Università degli Studi di Genova


Explicit Formulae for Power Utility Maximization Problems

We consider the problem of expected power utility maximization from terminal wealth in di ffusion market models under partial information. Explicit expressions for the value-process and for the optimal strategy are obtained for some interesting special cases. In particular, a closed form solution is given in terms of a PDE with terminal condition for Markovian models. An illustration of the optimal strategy is provided by means of some numerical simulations.

Backward stochastic di fferential equation; power utility maximization problem; basis risk model; stochastic correlation