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| Main Authors: | , , , |
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| Format: | Preprint |
| Published: |
2024
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2407.02915 |
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Table of Contents:
- In this paper we derive novel change of variable formulas for stochastic integrals w.r.t. a time-changed Brownian motion where we assume that the time-change is a general increasing stochastic process with finitely many jumps in a bounded set of the positive half-line and is independent of the Brownian motion. As an application we consider the problem of maximising the expected utility of the terminal wealth in a semimartingale setting, where the semimartingale is written in terms of a time-changed Brownian motion and a finite variation process. To solve this problem, we use an initial enlargement of filtration and our change of variable formulas to shift the problem to a maximisation problem under the enlarged filtration for models driven by a Brownian motion and a finite variation process. The latter problem can be solved by using martingale properties. Then applying again a change of variable formula, we derive the optimal strategy for the original problem for a power utility and for a logarithmic utility.