Optimum consumption and portfolio rules in a continuous-time model☆
TLDR
In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.About:
This article is published in Journal of Economic Theory.The article was published on 1971-12-01 and is currently open access. It has received 4952 citations till now. The article focuses on the topics: Geometric Brownian motion & Intertemporal portfolio choice.read more
Citations
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Journal ArticleDOI
Stock Options as Lotteries
Brian H. Boyer,Keith Vorkink +1 more
TL;DR: The authors investigated the relationship between ex ante total skewness and holding returns on individual equity options and found that these large premiums compensate intermediaries for bearing unhedgeable risk when accommodating investor demand for lottery-like options.
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Option Pricing Under Incompleteness and Stochastic Volatility
TL;DR: In this paper, the authors consider a general diffusion model for asset prices which allows the description of stochastic and past-dependent volatilities, and they show that for the purpose of pricing options, a small investor should use the minimal equivalent martingale measure associated to the underlying stock price process.
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Optimal portfolio management with American capital guarantee
TL;DR: In this paper, the optimality of the option based portfolio insurance method for both European and American cases, when an expected CRRA utility function is maximized, is investigated. But the objective of this paper is to investigate finite horizon portfolio strategies which maximize a utility criterion when a constraint is imposed on a terminal date (European guarantee) or on every intermediate date (American guarantee).
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Problems with using the normal distribution--and ways to improve quality and efficiency of data analysis.
Eckhard Limpert,Werner A. Stahel +1 more
TL;DR: The log-normal distribution can now be handled easily and characterized at the level of the original data with the help of both, a new sign, x/, times-divide, and notation, and it connects the multiplicative mean and the standard deviation in the form * x/s*, that is advantageous and recommended.
Option pricing under incompleteness and stochastic volatility.
TL;DR: In this article, the authors consider a general diffusion model for asset prices which allows the description of stochastic and past-dependent volatilities, and they show that for the purpose of pricing options, a small investor should use the minimal equivalent martingale measure associated to the underlying stock price process.
References
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Journal ArticleDOI
Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case
TL;DR: In this paper, the combined problem of optimal portfolio selection and consumption rules for an individual in a continuous-time model was examined, where his income is generated by returns on assets and these returns or instantaneous "growth rates" are stochastic.
Book
The theory of stochastic processes
David Cox,Hilton D. Miller +1 more
TL;DR: This book should be of interest to undergraduate and postgraduate students of probability theory.
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Lifetime Portfolio Selection By Dynamic Stochastic Programming
TL;DR: In this paper, the optimal consumption-investment problem for an investor whose utility for consumption over time is a discounted sum of single-period utilities, with the latter being constant over time and exhibiting constant relative risk aversion (power-law functions or logarithmic functions), is discussed.
Book
Stochastic Stability and Control
TL;DR: In this article, a book on stochastic stability and control dealing with Liapunov function approach to study of Markov processes is presented, which is based on the work of this article.
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