Sensitivity analysis of the utility maximisation problem with respect to model perturbations

@article{Mostovyi2017SensitivityAO,
  title={Sensitivity analysis of the utility maximisation problem with respect to model perturbations},
  author={Oleksii Mostovyi and Mihai S{\^i}rbu},
  journal={Finance and Stochastics},
  year={2017},
  volume={23},
  pages={595-640}
}
We consider the expected utility maximisation problem and its response to small changes in the market price of risk in a continuous semimartingale setting. Assuming that the preferences of a rational economic agent are modelled by a general utility function, we obtain a second-order expansion of the value function, a first-order approximation of the terminal wealth, and we construct trading strategies that match the indirect utility function up to the second order. The method, which is… 

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