Optimal multi-period consumption and investment with short-sale constraints

Yakup Arisoy (), Aslihan Salih and Mustafa Ç Pınar

Finance Research Letters, 2014, vol. 11, issue 1, 16-24

Abstract: This article examines agents’ consumption-investment problem in a multi-period pure exchange economy where agents are constrained with the short-sale of state-dependent risky contingent claims. In equilibrum, agents hold options written on aggregate consumption in their optimal portfolios. Furthermore, under the specific case of quadratic utility, the optimal risk-sharing rule derived for the pricing agent leads to a multifactor conditional consumption-based capital asset pricing model (CCAPM), where excess option returns appear as factors.

Keywords: Options; Optimization; Short-sales; Consumption-based CAPM (search for similar items in EconPapers)
JEL-codes: D50 D52 G11 G12 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Optimal Multi-Period Consumption and Investment with Short-Sale Constraints (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:1:p:16-24

DOI: 10.1016/j.frl.2013.05.007

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