In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time horizon. Our solution aligns with the theory of forward performances, with the added distinction of identifying, among the infinite possible solutions, the one for which the profile is the actual optimizer of the system of preferences specified a priori.
Berton, E., De Donno, M., Maggis, M., On consistency of optimal portfolio choice for state-dependent exponential utilities, <<QUANTITATIVE FINANCE>>, 2026; 2026 (N?A): N/A-N/A. [doi:10.1080/14697688.2026.2654734] [https://hdl.handle.net/10807/334716]
On consistency of optimal portfolio choice for state-dependent exponential utilities
Berton, Edoardo;De Donno, Marzia;
2026
Abstract
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time horizon. Our solution aligns with the theory of forward performances, with the added distinction of identifying, among the infinite possible solutions, the one for which the profile is the actual optimizer of the system of preferences specified a priori.
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