How to Manage Inflation Risk in an Asset Allocation Problem : an Algebric Aproximated Solution
This paper analyses the portfolio problem of an invetsor who wants to maximize the expected utility of his terminal real wealth in an incomplete financial market. The investor must cope with a set of stochastic investment opportunities and inflation risk following a jump-diffusion process. We investigate how the inflation risk affects the optimal portfolio composition and, at this aim, we present an approximated analytical solution to the portfolio choice problem based on the Feynman-Kac representation theorem. Finally, we compare our approximate solution with some exact solutions available in the literature and we find that the main qualitative results are maintained.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.