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Utility maximization in models with conditionally independent increments

By Jan Kallsen and Johannes Muhle-Karbe


We consider the problem of maximizing expected utility from terminal wealth in models with stochastic factors. Using martingale methods and a conditioning argument, we determine the optimal strategy for power utility under the assumption that the increments of the asset price are independent conditionally on the factor process.

OAI identifier: oai:RePEc:arx:papers:0911.3608
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