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Admissible investment strategies in continuous trading

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  • Aase, Knut K.
  • Øksendal, Bernt

Abstract

We consider a situation where relative prices of assets may change continuously and also have discrete jumps at random time points. The problem is the one of portfolio optimization. If the utility function used is the logarithm, we first argue that an optimal investment plan exists. Secondly, we show that any such plan has a certain optimality property known to hold also in discrete time models. Moreover, we show that this optimality criterion can be simplified significantly. In particular we show how admissibility can be related directly to observable characteristics of the investment strategy.

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Bibliographic Info

Article provided by Elsevier in its journal Stochastic Processes and their Applications.

Volume (Year): 30 (1988)
Issue (Month): 2 (December)
Pages: 291-301

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Handle: RePEc:eee:spapps:v:30:y:1988:i:2:p:291-301

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Related research

Keywords: optimal investment portfolio optimization continuous time model with diffusion and jumps;

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Cited by:
  1. Traian A. Pirvu & Gordan Zitkovic, 2007. "Maximizing the Growth Rate under Risk Constraints," Papers 0706.0480, arXiv.org.
  2. Jan Palczewski & Lukasz Stettner, 2007. "Growth-optimal portfolios under transaction costs," Papers 0707.3198, arXiv.org.
  3. Aase, Knut K., 2004. "Jump Dynamics: The Equity Premium and the Risk-Free Rate Puzzles," Discussion Papers 2004/12, Department of Business and Management Science, Norwegian School of Economics.
  4. Liu, Jun & Longstaff, Francis & Pan, Jun, 2001. "Dynamic Asset Allocation with Event Risk," University of California at Los Angeles, Anderson Graduate School of Management qt9fm6t5nb, Anderson Graduate School of Management, UCLA.

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