Minimizing the expected market time to reach a certain wealth level

Society for Industrial and Applied Mathematics
Publication Type:
Journal Article
SIAM Journal on Financial Mathematics, 2010, 1 (1), pp. 16 - 29
Issue Date:
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In a financial market model, we consider variations of the problem of minimizing the expected time to upcross a certain wealth level. For exponential L´evy markets, we show the asymptotic optimality of the growth-optimal portfolio for the above problem and obtain tight bounds for the value function for any wealth level. In an Ito market, we employ the concept of market time, which is a clock that runs according to the underlying market growth. We show the optimality of the growth-optimal portfolio for minimizing the expected market time to reach any wealth level. This reveals a general definition of market time which can be useful from an investors point of view. We utilize this last definition to extend the previous results in a general semimartingale setting.
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