SIAM Journal on Control and Optimization, Vol.52, No.6, 3517-3537, 2014
FORWARD BACKWARD SEMIMARTINGALE SYSTEMS FOR UTILITY MAXIMIZATION
We consider the problem of maximizing the expected utility of terminal wealth with a terminal random liability when the underlying asset price process is a continuous semimartingale. The optimal strategy is characterized in terms of a forward backward semimartingale system of equations. The results cover the cases of exponential, logarithmic, and power utilities, which we analyze as illustrative examples.
Keywords:forward backward stochastic differential system;semimartingale market model;utility maximization problem