Recent developments in portfolio optimization via dynamic programming

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Date

2015

Author

Omole, Oluwakayode John

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Optimal control is one of the benchmark methods used to handle portfolio optimization problems. The main goal in optimal control is to obtain a control process that optimizes the objective functional. In this thesis, we investigate optimal control problems for diffusion and jump-diffusion processes. Consequently, we present and prove concepts such as the Dynamic Programming principle, Hamilton-Jacobi-Bellman Equation and Verification Theorem. As an application of our results, we study optimization problems in finance and insurance. In this thesis, we use the Dynamic Programming approach to solve optimal control problems. In the applications, we provide a detailed study of optimal strategies that maximize the expected utility of investors and insurers in finite, random and infinite time horizons. In all applications considered, explicit solutions are obtained for the optimal value function and optimal control processes.

Subject Keywords

Investment analysis., Portfolio management., Dynamic programming., Hamilton-Jacobi equations., Mathematical optimization.

URI

http://etd.lib.metu.edu.tr/upload/12619018/index.pdf
https://hdl.handle.net/11511/25104

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Graduate School of Applied Mathematics, Thesis

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Citation Formats

O. J. Omole, “Recent developments in portfolio optimization via dynamic programming,” M.S. - Master of Science, Middle East Technical University, 2015.