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Author : Henri Pages
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (183 download)
Download or read book Optimal Consumption and Portfolio Policies when Markets are Incomplete written by Henri Pages and published by . This book was released on 1987 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Henri Pags
Publisher : Palala Press
ISBN 13 : 9781342051141
Total Pages : 36 pages
Book Rating : 4.0/5 (511 download)
Download or read book Optimal Consumption and Portfolio Policies When Markets Are Incomplete written by Henri Pags and published by Palala Press. This book was released on 2015-09-09 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work.As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Author : Henri Pagës
Publisher : Forgotten Books
ISBN 13 : 9781334017070
Total Pages : 34 pages
Book Rating : 4.0/5 (17 download)
Download or read book Optimal Consumption and Portfolio Policies When Markets Are Incomplete (Classic Reprint) written by Henri Pagës and published by Forgotten Books. This book was released on 2016-10-20 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Optimal Consumption and Portfolio Policies When Markets Are Incomplete The first question arises from the fact that when M is stictly included in X, only the marketed commodities have their price determined by arbitrage. There is an abundance of price functionals that extend 7r over all of X, and one could choose a priori any one of them. However, one candidate is of special interest to us: it is the (unique) one which is measurable with respect to the price system, i.e., such that the shadow price of consumption is itself in the price information set. With this particular valuation, it turns out that a solution 6 to the extended maximization program can always be chosen to be price measurable. And thus marketed. To see this, we have to recall a result from option pricing theory which states that the price of any contingent claim can be written as its expectation under some probability. Let. Then Q be the probability associated with our choice of the price measurable valuation, and take the conditional expectation of (3 under Q with respect to the price information set. The new consumption plan is price measurable by construction. In addition, it can be shown that it satisfies the same budget constraint and that. It is as least as preferred as 6. But 6 is Optimal by assumption, so that it. Should be clear that. The two solutions are in fact. Indifferent. Or even identical when the utility function is strictly concave. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author : HENRI. PAGES
Publisher :
ISBN 13 : 9781033553817
Total Pages : 0 pages
Book Rating : 4.5/5 (538 download)
Download or read book OPTIMAL CONSUMPTION AND PORTFOLIO POLICIES WHEN MARKETS ARE INCOMPLETE. written by HENRI. PAGES and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Claus Munk
Publisher :
ISBN 13 : 9788789375540
Total Pages : 270 pages
Book Rating : 4.3/5 (755 download)
Download or read book Optimal Consumption written by Claus Munk and published by . This book was released on 1997 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : George Chacko
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets written by George Chacko and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the optimal consumption and portfolio-choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset (quot;stocksquot;) with constant expected return and time-varying precision-the reciprocal of volatility. Markets are incomplete, and investors have recursive preferences defined over intermediate consumption. The paper obtains a solution to this problem which is exact for investors with unit elasticity of intertemporal substitution of consumption and approximate otherwise. The optimal portfolio demand for stocks includes an intertemporal hedging component that is negative when investors have coefficients of relative risk aversion larger than one, and the instantaneous correlation between volatility and stock returns is negative, as typically estimated from stock return data. Our estimates of the joint process for stock returns and precision (or volatility) using U.S. data confirm this finding. But we also find that stock return volatility does not appear to be variable and persistent enough to generate large intertemporal hedging demands.
Author : Rune Mølgaard
Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (129 download)
Download or read book Asset Allocation in Incomplete Markets With Endogenous Labor Supply written by Rune Mølgaard and published by . This book was released on 2008 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the consumption, labor and asset allocation problem of an agent, who is liquidity constrained and faces a stochastic wage that cannot be spanned by the available financial assets. The market is, as a result, incomplete. I also allow for simple trade restrictions which further increase the incompleteness of the economy. The optimal controls and the value function are characterized in terms of the viscosity solution of the associated Hamilton-Jacobi-Bellman equation, which is shown to exist and is characterized. The paper also shows that under a parameter restriction the viscosity solution is unique and for certain levels of risk aversion it is sufficiently smooth and coinciding with the classical solution which as a result exist and is unique. In addition the paper studies how the value function, consumption, labor and portfolio policies depend on the wealth to wage ratio. In particular it is shown that the wealth equivalent implicit value of the lifetime maximal wage income is increasing in the wealth to wage ratio and that for high wealth to wage ratios the agent will choose not to work. Finally the paper shows that the value function, the optimal consumption and the optimal portfolio weights approach the value function, the optimal consumption and the optimal portfolio weights respectively in a Merton (1969) setting without a labor-leisure choice, as the wealth to wage ratio goes to infinite.
Author : Mark D. Schroder
Publisher :
ISBN 13 :
Total Pages : 51 pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Lifetime Consumption-Portfolio Strategies Under Trading Constraints and Generalized Recursive Preferences written by Mark D. Schroder and published by . This book was released on 2006 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the lifetime consumption-portfolio problem in a competitive securities market with essentially arbitrary continuous price dynamics, and convex trading constraints (e.g., incomplete markets and short-sale constraints). Abstract first-order conditions of optimality are derived, based on a preference-independent notion of constrained state pricing. For homothetic generalized recursive utility, we derive closed-form solutions for the optimal consumption and trading strategy in terms of the solution to a single constrained BSDE. Incomplete market solutions are related to complete markets solutions with modified risk aversion towards non-marketed risk. Methodologically, we develop the utility gradient approach, but for the homothetic case we also verify the solution using the dynamic programming approach, without having to assume a Markovian structure. Finally, we present a class of parametric examples in which the BSDE characterizing the solution reduces to a system of Riccati equations.
Author : Yeung Lewis Chan
Publisher :
ISBN 13 :
Total Pages : 59 pages
Book Rating : 4.:/5 (129 download)
Download or read book Asset Allocation with Endogenous Labor Income written by Yeung Lewis Chan and published by . This book was released on 2008 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates optimal consumption and portfolio decisions with nontradable labor income and flexible labor supply. This paper considers risky labor income in a setting where wage income and stock returns are not perfectly correlated. The paper provides approximate closed-form solutions to the problem, allowing for a thorough characterization of the optimal consumption and portfolio policies. These solutions show that, when labor income risk is idiosyncratic, the presence of labor/leisure choice can have dramatic positive effects on portfolio allocations relative to the benchmark in which labor income is exogenously given to the investor. The main mechanism delivering this result is that consumption becomes less sensitive to financial downfalls, thus raising the incentive to participate in the stock market.
Author : Domenico Cuoco
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Optimal Consumption and Equilibrium Prices with Portfolio Cone Constraints and Stochastic Labor Income written by Domenico Cuoco and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the individual's consumption and investment problem when labor income follows a general bounded process and the dollar amounts invested in the risky assets are constrained to take values in a given nonempty, closed, convex cone. Short sale constraints, as well as incomplete markets, can be modeled as special cases of this setting. Existence of optimal policies is established using martingale and duality techniques under fairly general assumptions on the security price coefficients and the individual's utility function. This result is obtained by reformulating the individual's dynamic optimization problem as a dual static problem over a space of martingales. An explicit characterization of equilibrium risk premia in the presence of portfolio constraints is also provided. In the unconstrained case, this characterization reduces to Consumption-based Capital Asset Pricing Model.
Author : Leonid Kogan
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (12 download)
Download or read book Risk Aversion and Optimal Portfolio Policies in Partial and General Equilibrium Economies written by Leonid Kogan and published by . This book was released on 2001 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In this article, we show how to analyze analytically the equilibrium policies and prices in an economy with a stochastic investment opportunity set and incomplete financial markets, when agents have power utility over both intermediate consumption and terminal wealth, and face portfolio constraints. The exact local comparative statics and approximate but analytical expression for the portfolio policy and asset prices are obtained by developing a method based on perturbation analysis to expand around the solution for an investor with log utility. We then use this method to study a general equilibrium exchange economy with multiple agents who differ in their degree of risk aversion and face borrowing constraints. We characterize explicitly the consumption and portfolio policies and also the properties of asset returns. We find that the volatility of stock returns increases with the cross-sectional dispersion of risk aversion, with the cross-sectional dispersion in portfolio holdings, and with the relaxation of the constraint on borrowing. Moreover, tightening the borrowing constraint lowers the risk-free interest rate and raises the equity premium in equilibrium.
Author : Domenico Cuoco
Publisher :
ISBN 13 :
Total Pages : 238 pages
Book Rating : 4.:/5 (33 download)
Download or read book Essays on Dynamic Equilibrium written by Domenico Cuoco and published by . This book was released on 1994 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sasha Ferdinand Stoikov
Publisher :
ISBN 13 :
Total Pages : 288 pages
Book Rating : 4.:/5 (878 download)
Download or read book Optimal Strategies in Incomplete Financial Markets written by Sasha Ferdinand Stoikov and published by . This book was released on 2005 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis analyzes the optimal strategies of rational agents in incomplete financial markets. The incompleteness may arise from the stochastic volatility of stock prices, in which case we study the optimal pricing and hedging strategies of an option trader. We introduce a new concept that we call the relative indifference price, which is the price at which a trader is indifferent to trade in an additional option, given that he is currently holding and dynamically hedging a portfolio of options. We find that the appropriate volatility risk premium depends on the trader's risk aversion coeffcient and his portfolio position before selling or buying the additional option. More generally, the incompleteness of the market may arise from both the drift and volatility of the stock being driven by a correlated factor. In this setting, we study the optimal consumption and investment policies of CARA, conservative CRRA and aggressive CRRA agents. In particular, we provide interpretations of the non-myopic investment in terms of martingale measures and the risk monitoring strategy of a path-dependent option.
Author : John R. Birge
Publisher : Elsevier
ISBN 13 : 9780080553252
Total Pages : 1026 pages
Book Rating : 4.5/5 (532 download)
Download or read book Handbooks in Operations Research and Management Science: Financial Engineering written by John R. Birge and published by Elsevier. This book was released on 2007-11-16 with total page 1026 pages. Available in PDF, EPUB and Kindle. Book excerpt: The remarkable growth of financial markets over the past decades has been accompanied by an equally remarkable explosion in financial engineering, the interdisciplinary field focusing on applications of mathematical and statistical modeling and computational technology to problems in the financial services industry. The goals of financial engineering research are to develop empirically realistic stochastic models describing dynamics of financial risk variables, such as asset prices, foreign exchange rates, and interest rates, and to develop analytical, computational and statistical methods and tools to implement the models and employ them to design and evaluate financial products and processes to manage risk and to meet financial goals. This handbook describes the latest developments in this rapidly evolving field in the areas of modeling and pricing financial derivatives, building models of interest rates and credit risk, pricing and hedging in incomplete markets, risk management, and portfolio optimization. Leading researchers in each of these areas provide their perspective on the state of the art in terms of analysis, computation, and practical relevance. The authors describe essential results to date, fundamental methods and tools, as well as new views of the existing literature, opportunities, and challenges for future research.
Author : G. Constantinides
Publisher : Elsevier
ISBN 13 : 0080495087
Total Pages : 698 pages
Book Rating : 4.0/5 (84 download)
Download or read book Handbook of the Economics of Finance written by G. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volume 1B covers the economics of financial markets: the saving and investment decisions; the valuation of equities, derivatives, and fixed income securities; and market microstructure.
Author : Ralf Korn
Publisher : World Scientific
ISBN 13 : 9812385347
Total Pages : 352 pages
Book Rating : 4.8/5 (123 download)
Download or read book Optimal Portfolios written by Ralf Korn and published by World Scientific. This book was released on 1997 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: The focus of the book is the construction of optimal investment strategies in a security market model where the prices follow diffusion processes. It begins by presenting the complete Black-Scholes type model and then moves on to incomplete models and models including constraints and transaction costs. The models and methods presented will include the stochastic control method of Merton, the martingale method of Cox-Huang and Karatzas et al., the log optimal method of Cover and Jamshidian, the value-preserving model of Hellwig etc.
Author : Dingzhu Du
Publisher : Springer Science & Business Media
ISBN 13 : 3540677879
Total Pages : 490 pages
Book Rating : 4.5/5 (46 download)
Download or read book Computing and Combinatorics written by Dingzhu Du and published by Springer Science & Business Media. This book was released on 2000-07-12 with total page 490 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book constitutes the refereed proceedings of the 6th Annual International Conference on Computing and Combinatorics, COCOON 2000, held in Sydney, Australia in July 2000. The 44 revised full papers presented together with two invited contributions were carefully reviewed and selected from a total of 81 submissions. The book offers topical sections on computational geometry; graph drawing; graph theory and algorithms; complexity, discrete mathematics, and number theory; online algorithms; parallel and distributed computing; combinatorial optimization; data structures and computational biology; learning and cryptography; and automata and quantum computing.
