Dynamic intertemporal utility optimization by means of Riccati transformation of Hamilton–Jacobi–Bellman equation

• Published in: Japan journal of industrial and applied mathematics Vol. 36; no. 2; pp. 497 - 519
• Main Authors: Kilianová, Soňa, Ševčovič, Daniel
• Format: Journal Article
• Language: English
• Published: Tokyo Springer Japan 01.07.2019; Springer Nature B.V
• Subjects: Applications of Mathematics; Computational Mathematics and Numerical Analysis; Economic models; Mathematical analysis; Mathematics; Mathematics and Statistics; Numerical analysis; Numerical methods; Optimization; Original Paper; Transformations (mathematics); Traveling waves; Finite volume scheme; 70H20; Dynamic stochastic portfolio optimization; Dynamic utility; Hamilton–Jacobi–Bellman equation; 91B16; 91B70; 90C15; Riccati transformation; 35K55; 34E05

In this paper we investigate a dynamic stochastic portfolio optimization problem involving both the expected terminal utility and intertemporal utility maximization. We solve the problem by means of a solution to a fully nonlinear evolutionary Hamilton–Jacobi–Bellman (HJB) equation. We propose the s...