Abstract, classic, and explicit turnpikes
Files
Accepted manuscript
Date
2014
Authors
Guasoni, Paolo
Kardaras, C.
Robertson, Scott
Xing, Hao
Version
Accepted manuscript
OA Version
Citation
P. Guasoni, C. Kardaras, S. Robertson, H. Xing. 2014. "Abstract, classic, and explicit turnpikes." Finance and Stochastics, Volume 18, Issue 1, pp. 75 - 114. https://doi.org/10.1007/s00780-013-0216-5
Abstract
Portfolio turnpikes state that, as the investment horizon increases, optimal portfolios
for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turn-
pikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs
and portfolios converge under their myopic probabilities. In diffusion models with several assets
and a single state variable, the classic turnpike demonstrates that optimal portfolios converge un-
der the physical probability; meanwhile the explicit turnpike identifies the limit of finite-horizon
optimal portfolios as a long-run myopic portfolio defined in terms of the solution of an ergodic HJB
equation.