Exponential Utility

Optimal Diversification and Leverage in a Utility-Based Portfolio Allocation Approach ArXiv ID: 2503.07498 “View on arXiv” Authors: Unknown Abstract We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance existing methodologies by incorporating compound probability distributions to model the effects of both statistical and non-stationary uncertainties. Additionally, we extend the maximum expected utility objective by including the variance of utility in the objective function, which we term generalized mean-variance. In the case of logarithmic utility, it provides a natural explanation for the half-Kelly criterion, a concept widely used by practitioners. ...

Exponential Utility Maximization in a Discrete Time Gaussian Framework ArXiv ID: 2305.18136 “View on arXiv” Authors: Unknown Abstract The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in Mathematical Finance, we also consider an investor who is informed about the risky asset’s price changes with a delay. Our method of solution is based on the theory developed in [“4”] and guessing the optimal portfolio. ...