Optimal portfolios for exponential Lévy processes

Jan Kallsen

Mathematical Methods of Operations Research, 2000, vol. 51, issue 3, 357-374

Abstract: We consider the problem of maximizing the expected utility from consumption or terminal wealth in a market where logarithmic securities prices follow a Lévy process. More specifically, we give explicit solutions for power, logarithmic and exponential utility in terms of the Lévy-Khintchine triplet. In the first two cases, a constant fraction of current wealth should be invested in each of the securities, as is well-known for related discrete-time models and for Brownian motion. The situation is different for exponential utility. Copyright Springer-Verlag Berlin Heidelberg 2000

Keywords: Key words: portfolio optimization; exponential Lévy processes; HARA utility; martingale method (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:mathme:v:51:y:2000:i:3:p:357-374

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DOI: 10.1007/s001860000048

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