A Portfolio Decomposition Formula
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This paper derives a portfolio decomposition formula when the agent maximizes
utility of her wealth at some finite planning horizon. The financial market is
complete and consists of multiple risky assets (stocks) plus a risk free asset.
The stocks are modelled as exponential Brownian motions with drift and
volatility being Ito processes. The optimal portfolio has two components: a
myopic component and a hedging one. We show that the myopic component is robust
with respect to stopping times. We employ the Clark-Haussmann formula to derive
portfolio s hedging component.