On the Verification Theorem of Dynamic Portfolio-Consumption Problems with Stochastic Market Price of Risk
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- Honda, T. & Kamimura, S. Asia-Pac Financ Markets (2011) 18: 151. doi:10.1007/s10690-010-9128-y
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In this paper, we study a dynamic portfolio-consumption optimization problem when the market price of risk is driven by linear Gaussian processes. We show sufficient conditions to verify that an explicit solution derived from the Hamilton-Jacobi-Bellman equation is in fact an optimal solution to the portfolio selection problem.