Growth Optimal Portfolio for unobservable Markov-modulated markets
by I. Venkat Appal Raju; N. Selvaraju
International Journal of Mathematics in Operational Research (IJMOR), Vol. 4, No. 1, 2012

Abstract: The paper studies the benchmark approach for pricing and hedging in incomplete markets where the investor has to filter the incomplete information. We consider a jump diffusion Markov modulated market model and derive the Growth Optimal Portfolio (GOP), by using the stochastic control method. Using GOP, we price and hedge European options where the existence of the equivalent martingale measure is not necessary.

Online publication date: Tue, 23-Dec-2014

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