IDEAS home Printed from https://ideas.repec.org/a/taf/apmtfi/v13y2006i4p285-307.html
   My bibliography  Save this article

Optimum Constrained Portfolio Rules in a Diffusion Market

Author

Listed:
  • Fernando Durrell

Abstract

A portfolio selection model is derived for diffusions where inequality constraints are imposed on portfolio security weights. Using the method of stochastic dynamic programming Hamilton-Jacobi-Bellman (HJB) equations are obtained for the problem of maximizing the expected utility of terminal wealth over a finite time horizon. Optimal portfolio weights are given in feedback form in terms of the solution of the HJB equations and its partial derivatives. An analysis of the no-constraining (NC) region of a portfolio is also conducted.

Suggested Citation

  • Fernando Durrell, 2006. "Optimum Constrained Portfolio Rules in a Diffusion Market," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(4), pages 285-307.
  • Handle: RePEc:taf:apmtfi:v:13:y:2006:i:4:p:285-307
    DOI: 10.1080/13504860600840061
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/13504860600840061
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vila, Jean-Luc & Zariphopoulou, Thaleia, 1997. "Optimal Consumption and Portfolio Choice with Borrowing Constraints," Journal of Economic Theory, Elsevier, vol. 77(2), pages 402-431, December.
    2. Framstad, Nils Chr. & Oksendal, Bernt & Sulem, Agnes, 2001. "Optimal consumption and portfolio in a jump diffusion market with proportional transaction costs," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 233-257, April.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:13:y:2006:i:4:p:285-307. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAMF20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.