Forward Investment Performance Processes in Semimartingale Financial Markets. (arXiv:1811.11899v1 [math.PR])

We analyze the forward performance process in a general semimartingale market accounting for portfolio constraints, when investor's preferences are homothetic. We provide necessary and sufficient conditions for the construction of such a performance process, and establish its connection to the solution of an infinite-horizon quadratic backward stochastic differential equation (BSDE) driven by a semimartingale. We prove the existence and uniqueness of a solution to our infinite-horizon BSDE using techniques based on Jacod's decomposition and an extended argument of the comparison principle for finite-horizon BSDEs. We show the equivalence between the factor representation of the BSDE solution and the smooth solution to the ill-posed partial integral-differential Hamilton-Jacobi-Bellman (HJB) equation arising in the extended semimartingale factor framework. Our study generalizes existing results on forward performance in Brownian settings, and shows that time-monotone processes are prese 查看全文>>