Convex Duality in Stochastic Optimization and Mathematical Finance

Convex Duality in Stochastic Optimization and Mathematical Finance

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Article ID: iaor20116010
Volume: 36
Issue: 2
Start Page Number: 340
End Page Number: 362
Publication Date: May 2011
Journal: Mathematics of Operations Research
Authors:
Keywords: programming: mathematical
Abstract:

This paper proposes a general duality framework for the problem of minimizing a convex integral functional over a space of stochastic processes adapted to a given filtration. The framework unifies many well‐known duality frameworks from operations research and mathematical finance. The unification allows the extension of some useful techniques from these two fields to a much wider class of problems. In particular, combining certain finite‐dimensional techniques from convex analysis with measure theoretic techniques from mathematical finance, we are able to close the duality gap in some situations where traditional topological arguments fail.

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