Abstract:
Abstract. The stochastic volatility extension of the Black-Scholes model for one stock price is applied to the problem of stochastic portfolio optimization. The main assumption is that the portfolio manager has discrete access to the continuous-time stock prices. In this partial information situation, one cannot hope for an arbitrarily accurate estimate of the stochastic volatility. Using instead a new type of optimal stochastic ltering, and its associated particle method due to del Moral, Jacod, and Protter [10], we propose a Monte-Carlo-type algorithm for solving the optimization problem. 1.
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