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Asymptotics of HARA Utility from Terminal Wealth under Proportional Transaction Costs with Decision Lag or Execution Delay and Obligatory Diversification

In: Advanced Mathematical Methods for Finance

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  • Lukasz Stettner

    (Polish Acad. Sci., Institute of Mathematics)

Abstract

In the paper optimal asymptotics of HARA utility from terminal wealth under proportional transaction costs is considered. The asset prices are modeled as exponents of diffusion with jumps whose parameters depend on a finite-state Markov process of economic factors. An obligatory portfolio diversification is introduced, according to which it is required to invest at least a fixed small portion of our wealth in each asset. Since we are looking for optimal strategies within the class of impulse controls, two kinds of delay are introduced: decision lag, when successive portfolio changes are separated by a fixed time lag h, and execution delay, when portfolio is changed after h units of time following the decision.

Suggested Citation

  • Lukasz Stettner, 2011. "Asymptotics of HARA Utility from Terminal Wealth under Proportional Transaction Costs with Decision Lag or Execution Delay and Obligatory Diversification," Springer Books, in: Giulia Di Nunno & Bernt Øksendal (ed.), Advanced Mathematical Methods for Finance, chapter 0, pages 509-536, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-18412-3_18
    DOI: 10.1007/978-3-642-18412-3_18
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