Asymptotics of HARA Utility from Terminal Wealth under Proportional Transaction Costs with Decision Lag or Execution Delay and Obligatory Diversification

Lukasz Stettner ()
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Lukasz Stettner: Polish Acad. Sci., Institute of Mathematics

Chapter Chapter 18 in Advanced Mathematical Methods for Finance, 2011, pp 509-536 from Springer

Abstract: Abstract In the paper optimal asymptotics of HARA utility from terminal wealth under proportional transaction costs is considered. The asset prices are modeled as exponents of diffusion with jumps whose parameters depend on a finite-state Markov process of economic factors. An obligatory portfolio diversification is introduced, according to which it is required to invest at least a fixed small portion of our wealth in each asset. Since we are looking for optimal strategies within the class of impulse controls, two kinds of delay are introduced: decision lag, when successive portfolio changes are separated by a fixed time lag h, and execution delay, when portfolio is changed after h units of time following the decision.

Keywords: HARA utility; Terminal weath asymptotics; Proportional transaction costs; Log Levy asset prices; 91G10; 91G80 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-18412-3_18

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DOI: 10.1007/978-3-642-18412-3_18

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