34 research outputs found
On the Continuity of Stochastic Exit Time Control Problems
We determine a weaker sufficient condition than that of Theorem 5.2.1 in
Fleming and Soner (2006) for the continuity of the value functions of
stochastic exit time control problems.Comment: The proof of Lemma 3.1 is slightly modified, and Remark 4.1 is
rephrased for better presentations. In addition, some typos are corrected
Outperforming the market portfolio with a given probability
Our goal is to resolve a problem proposed by Fernholz and Karatzas [On
optimal arbitrage (2008) Columbia Univ.]: to characterize the minimum amount of
initial capital with which an investor can beat the market portfolio with a
certain probability, as a function of the market configuration and time to
maturity. We show that this value function is the smallest nonnegative
viscosity supersolution of a nonlinear PDE. As in Fernholz and Karatzas [On
optimal arbitrage (2008) Columbia Univ.], we do not assume the existence of an
equivalent local martingale measure, but merely the existence of a local
martingale deflator.Comment: Published in at http://dx.doi.org/10.1214/11-AAP799 the Annals of
Applied Probability (http://www.imstat.org/aap/) by the Institute of
Mathematical Statistics (http://www.imstat.org