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Optimal Consumption and Investment with Lévy Processes

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  • José Santiago Fajardo Barbachan

Abstract

This paper study the intertemporal consumption and investment problem in a continuous time setting when the secutity prices follow a Geometric Levy Process. Using stochastic calculus for semimartingals we obtain sufficient conditions for the existence of optimal consump- tion and investment policies.

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File URL: http://bibliotecadigital.fgv.br/ojs/index.php/rbe/article/view/860
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Bibliographic Info

Article provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its journal Revista Brasileira de Economia.

Volume (Year): 57 (2003)
Issue (Month): 4 (October)
Pages: 825-848

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Handle: RePEc:fgv:epgrbe:v:57:n:4:a:8

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  1. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
  2. Ernst Eberlein & Jean Jacod, 1997. "On the range of options prices (*)," Finance and Stochastics, Springer, vol. 1(2), pages 131-140.
  3. Hua He and Neil D. Pearson., 1989. "Consumption and Portfolio Policies with Incomplete Markets and Short-Sale Constraints: The Infinite Dimensional Case," Research Program in Finance Working Papers RPF-191, University of California at Berkeley.
  4. Svensson, L.E. & Werner, I., 1990. "Nontraded Assets in Incomplete Markets: Pricing and Portfolio Choices," Papers 477, Stockholm - International Economic Studies.
  5. Tina Hviid Rydberg, 1999. "Generalized Hyperbolic Diffusion Processes with Applications in Finance," Mathematical Finance, Wiley Blackwell, vol. 9(2), pages 183-201.
  6. Cuoco, Domenico, 1997. "Optimal Consumption and Equilibrium Prices with Portfolio Constraints and Stochastic Income," Journal of Economic Theory, Elsevier, vol. 72(1), pages 33-73, January.
  7. Praetz, Peter D, 1972. "The Distribution of Share Price Changes," The Journal of Business, University of Chicago Press, vol. 45(1), pages 49-55, January.
  8. Philip H. Dybvig & Chi-fu Huang, 1988. "Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans," Cowles Foundation Discussion Papers 860, Cowles Foundation for Research in Economics, Yale University.
  9. He, Hua & Pages, Henri F, 1993. "Labor Income, Borrowing Constraints, and Equilibrium Asset Prices," Economic Theory, Springer, vol. 3(4), pages 663-96, October.
  10. repec:wop:humbsf:1998-23 is not listed on IDEAS
  11. Eberlein, Ernst & Keller, Ulrich & Prause, Karsten, 1998. "New Insights into Smile, Mispricing, and Value at Risk: The Hyperbolic Model," The Journal of Business, University of Chicago Press, vol. 71(3), pages 371-405, July.
  12. Ole E. Barndorff-Nielsen, 1997. "Processes of normal inverse Gaussian type," Finance and Stochastics, Springer, vol. 2(1), pages 41-68.
  13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  14. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
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