Campuses:

Forward Utility and Mean-Variance based optimal portfolios

Saturday, May 19, 2012 - 11:00am - 11:45am
Keller 3-180
Marek Musiela (BNP Paribas)
Recently a new concept of the so called forward utility has been proposed, studied and used in the context of portfolio optimization. We recall the fundamental results of this approach in the case when the forward utility is monotone. Then we construct an analogous multi-period mean-variance optimization framework, derive the optimal portfolios and compare the outcomes. It turns out that the utility and mean-variance based optimal portfolios coincide when one chooses the appropriate levels of the risk tolerance.
MSC Code: 
32-XX