On consistency of optimal portfolio choice for state-dependent exponential utilities
Abstract
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time horizon. Our solution aligns with the theory of forward performances, with the added distinction of identifying, among the infinite possible solutions, the one for which the profile remains optimal at all times for the market-adjusted system of preferences adopted.
0
Turn this paper into a full lesson
ArcXiv compiles a staged curriculum from this paper: 8-12 lessons across beginner → advanced, synthesised section guides, visuals, flashcards, a quiz, exercises, and on-demand deep dives per section. Grounded in the abstract, never invented.