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Investment Strategies for HARA Utility Function : A General Algebraic Approximated Solution

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  • Francesco, MENONCIN

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

In an incomplete financial market where an investor maximizes the expected HARA utility of his terminal real wealth, we present an algebraic approximated solution for the optimal portfolio composition. We take into account : (i) a (finite) set of assets, (ii) a (finite) set of state variables and (iii) a consumption price process, all of them described by general Ito processes; Finally, we supply an easy test for checking the goodness of the approximated result.

Suggested Citation

  • Francesco, MENONCIN, 2002. "Investment Strategies for HARA Utility Function : A General Algebraic Approximated Solution," LIDAM Discussion Papers IRES 2002034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2002034
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    References listed on IDEAS

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    More about this item

    Keywords

    Incomplete Market; Inflation Risk; Hamilton-Jacobi-Bellman equation; HARA utility function;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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