This paper addresses the optimal consumption/investment problem in a mixed discrete/continuous time model in presence of rarely traded stocks. Stochastic control theory with state variable driven by a jump-diffusion, via dynamic programming, is used. The theoretical study is validated through numerical experiments, and the proposed model is compared with the classical Merton’s portfolio. Some financial insights are provided.
Optimal consumption/investment problem with light stocks: A mixed continuous-discrete time approach / Castellano, R.; Cerqueti, R.. - In: APPLIED MATHEMATICS AND COMPUTATION. - ISSN 0096-3003. - 218:(2012), pp. 6887-6898. [10.1016/j.amc.2011.12.065]
Optimal consumption/investment problem with light stocks: A mixed continuous-discrete time approach
R. Cerqueti
2012
Abstract
This paper addresses the optimal consumption/investment problem in a mixed discrete/continuous time model in presence of rarely traded stocks. Stochastic control theory with state variable driven by a jump-diffusion, via dynamic programming, is used. The theoretical study is validated through numerical experiments, and the proposed model is compared with the classical Merton’s portfolio. Some financial insights are provided.| File | Dimensione | Formato | |
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