Value preserving strategies and a general framework for local approaches to optimal portfolios. (Q2707145)

This paper incorporates the value-preserving approach into the general framework for local approaches to optimal portfolio. The value-preserving approach differs from the stochastic control approach in that it is non-utility based. In this model, the local approach to portfolio optimization first looks for a good choice of the portfolio process and portfolio return, and then to realize value preserving that is free of arbitrage.NEWLINENEWLINEThe paper includes the following major sections. The second section derives the properties of portfolio optimization. The third section explains the portfolio value and value-preserving strategies. In particular, it derives the conditions under which arbitrage opportunity arises. The fourth section proves the existence of value-preserving strategies.