Optimal sure portfolio plans

Foldes, Lucien (1990) Optimal sure portfolio plans. Financial Markets Group Discussion Papers (106). Financial Markets Group, The 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 H Social Sciences > HB Economic Theory
JEL classification:	G - Financial Economics > G0 - General > G00 - General G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
Date Deposited:	29 May 2008 08:58
Last Modified:	15 Sep 2023 22:39
URI:	http://eprints.lse.ac.uk/id/eprint/5137

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