Power Utility Maximization Problems Under Partial Information and Information Sufficiency in a Brownian Setting

We consider the problem of expected power utility maximization from terminal wealth in diffusion market models under partial information. After obtaining novel neat expressions for the value-process and for the optimal strategy, the issue of information sufficiency is addressed. In particular, neces...

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Bibliographic Details
Published in:Stochastic analysis and applications 2015-05, Vol.33 (3), p.493-509
Main Authors: Santacroce, M., Sasso, E., Trivellato, B., Covello, D.
Format: Article
Language:English
Subjects:
Backward stochastic differential equation
Basis risk model
Diffusion
Information sufficiency
Markets
Maximization
Optimization
Power utility maximization problem
Primary 90A09
Secondary 60H30
Stochastic correlation
Stochasticity
Strategy
Terminals
Utilities
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Summary:We consider the problem of expected power utility maximization from terminal wealth in diffusion market models under partial information. After obtaining novel neat expressions for the value-process and for the optimal strategy, the issue of information sufficiency is addressed. In particular, necessary and sufficient conditions that guarantee that the partial information optimal strategy is still optimal when having access to all market information, are provided.
ISSN:0736-2994
1532-9356
DOI:10.1080/07362994.2015.1009758