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Power utility maximization in exponential Lévy models: convergence of discrete-time to continuous-time maximizers

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  • Johannes Temme

Abstract

We consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Lévy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid. Under minimal assumptions we prove convergence of the optimal discrete-time strategies to the continuous-time counterpart. In addition, we provide and compare qualitative properties of the discrete-time and continuous-time optimizers. Copyright Springer-Verlag 2012

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  • Johannes Temme, 2012. "Power utility maximization in exponential Lévy models: convergence of discrete-time to continuous-time maximizers," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 76(1), pages 21-41, August.
    • Handle: RePEc:spr:mathme:v:76:y:2012:i:1:p:21-41
    DOI: 10.1007/s00186-012-0388-3
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