Optimum consumption and portfolio rules in a continuous-time model☆
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Cites background or methods from "Optimum consumption and portfolio r..."
...Merton [ 37 ] derives the optimal consumption and portfolio policies by solving a nonlinear partial differential equation (pde) governing the utility of optimized wealth....
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...The portfolio selection problem pioneered by Markowitz [36] and Merton [ 37 ] generally does not formally consider derivative securities as potential investment vehicles....
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...This setup shares the analytical advantages of the Merton [ 37 ] continuous-time economy, except that we now deal with infinitely many assets at a single point in time....
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...This is the viewpoint taken in the continuous-time analyses by Merton [ 37 ], Brennan et al [8], Pliska [41] and Cox and Huang [14]....
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...For example, the Cox and Huang [14] solution to the Merton [ 37 ] problem can be used to obtain the payoff that is actually being replicated through dynamic trading in the underlying assets....
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References
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