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| Volume 8 / Number 2, Winter 2004/05 |
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| Optimal portfolio series formula under dynamic appreciation rate uncertainty |
Srdjan D. Stojanovic |
| Department of Mathematical Sciences, University of Cincinnati, Cincinnati, OH 45221-0025, USA |
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A closed-form series solution formula for the problem of optimal portfolio
diversification under dynamic (possibly, long-term-memory) appreciation rate
uncertainty, for an investor with Hara utility, is found. To that end a calculus of
variations method, recently introduced by the author, was extended. The usefulness
of the obtained result is examined by means of example solutions to a
few guiding problems. To that end we also introduce the notion of T-truncated
fractional Brownian motion and study its series expansions. |
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