Investment Strategies in Incomplete Markets: Sufficient Conditions for a Closed Form Solution

Francesco Menoncin ()

No 2002033, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper analyses the portfolio problem of an investor who wants to maximize the expected power utility of his terminal wealth both in a complete and an incomplete financial market. We derive sufficient conditions for having a closed form solution. These conditions must hold on a suitable combination of the drift and diffusion coefficients of the stochastic processes describing the state variables and the asset prices. In particular, we show that our framework leads to two cases : (i) the case solvable thorough a log-linear value fucntion, and (ii) the case solvable thorough a log quadratie value function.

Keywords: Optimal portfolio choice; Incomplete market; Hamilton-Jacobi-Bellman equation (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 26
Date: 2002-08-01
New Economics Papers: this item is included in nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/2002-33.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2002033

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().