Corpus ID: 204734115

Portfolio optimization in the case of an exponential utility function and in the presence of an illiquid asset

@article{Bordag2019PortfolioOI,
  title={Portfolio optimization in the case of an exponential utility function and in the presence of an illiquid asset},
  author={Ljudmila A. Bordag},
  journal={arXiv: Portfolio Management},
  year={2019}
}
We study an optimization problem for a portfolio with a risk-free, a liquid risky, and an illiquid asset which is sold in an exogenous random moment of time with a prescribed liquidation time distribution. Problems of such type lead to three dimensional nonlinear partial differential equations (PDEs) on the value function. We study the optimization problem with a utility function of a CARA type, i.e. with negative and positive exponential utility functions (EXPn and EXPp). It is well known that… Expand

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