Optimal Sure Portfolio Plans

Lucien Foldes ()

FMG Discussion Papers from Financial Markets Group

Abstract: This paper is a sequel to [2], where a model of optimal accumulation of capital and portfolio choice over an infinite horizon in continuous time was considered in which the vector process representing returns to investment is a general semimartingale with independent increments and the welfare functional has the discounted constant relative risk aversion (CRRA) form. A problem of optimal choice of a sure (i.e. non-random) portfolio plan can be defined in such a way that solutions of this problem correspond to the distant future is sufficiently discounted. This has been proved in [2], land is in part proved again here by different methods. Using the canonical representation of a PII-semimartingale, a formula of Lévy-Khinchin type is derived for the Bilateral Laplace Transform of the compound interest process generated by a sure portfolio plan. With its aid, the existence of an optimal sure portfolio plan is proved under suitable conditions, and various causes of non-existence are identified. Programming conditions characterising an optimal sure portfolio plan are also obtained.

Date: 1990-11
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/DP106.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:fmg:fmgdps:dp106

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().