Portfolio optimisation with jumps: Illustration with a pension accumulation scheme

Olivier Le Courtois and Francesco Menoncin
Additional contact information
Olivier Le Courtois: EM - EMLyon Business School

Post-Print from HAL

Abstract: In this paper, we address portfolio optimisation when stock prices follow general Lévy processes in the context of a pension accumulation scheme. The optimal portfolio weights are obtained in quasi-closed form and the optimal consumption in closed form. To solve the optimisation problem, we show how to switch back and forth between the stochastic differential and standard exponentials of the Lévy processes. We apply this procedure to both the Variance Gamma process and a Lévy process whose arrival rate of jumps exponentially decreases with size. We show through a numerical example that when jumps, and therefore asymmetry and leptokurtosis, are suitably taken into account, then the optimal portfolio share of the risky asset is around half that obtained in the Gaussian framework.

Keywords: optimal Portfolio; Lévy process; Stochastic Exponential; Pension Fund (search for similar items in EconPapers)
Date: 2015-11-01
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in Journal of Banking & Finance, 2015, 60, pp.127-137 P

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-02313306

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().