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Optimal sure portfolio plans

Foldes, Lucien (1990) Optimal sure portfolio plans. . Financial Markets Group, London School of Economics and Political Science, London, UK.

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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.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 1990 the author
Divisions: Financial Markets Group
Economics
Subjects: H Social Sciences > HG Finance
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Departments > Economics
Collections > LSE Financial Markets Group (FMG) Working Papers
Date Deposited: 29 May 2008 08:58
Last Modified: 20 Nov 2019 02:59
URI: http://eprints.lse.ac.uk/id/eprint/5137

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