Optimal Investment and Consumption Strategies for a Class of Utility Functions PDF Download

Author: Nils Hemming Hakansson
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 262

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Author: Elyes Jouini
Publisher:
ISBN:
Category :
Languages : en
Pages : 11

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In this paper we study the stability (in the L^{p} as well as for the almost sure convergence sense) of the optimal investment-consumption strategy with respect to the choice of the utility function.

Author: Nils H. Hakansson
Publisher:
ISBN:
Category :
Languages : en
Pages : 46

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In a previous paper, the author presented a normative model of the individual's economic decision problem under risk. This model is now extended to include the case in which the individual has an uncertain life-time, a bequest motive, and the opportunity to enter into contracts of insurance. Optimal investment and consumption strategies are derived, where possible, for the class of utility functions whose proportional risk aversion indices are constants, and their properties are noted. In consequence of one of these properties, it is shown that the model gives rise to an induced theory of the firm under risk, which may be viewed as an extension of the theory developed for the case in which the horizon is certain. In addition, it is found that when the premium charged is 'fair, ' any given individual may be able to make himself better off both by the purchase of insurance on his own life and the sale of insurance on the lives of others. (Author).

Author: Leonard C Maclean
Publisher: World Scientific
ISBN: 981446581X
Category : Business & Economics
Languages : en
Pages : 883

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This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.Contents: "The Early Ideas and Contributions: "Introduction to the Early Ideas and ContributionsExposition of a New Theory on the Measurement of Risk (translated by Louise Sommer) "(D Bernoulli)"A New Interpretation of Information Rate "(J R Kelly, Jr)"Criteria for Choice among Risky Ventures "(H A Latan‚)"Optimal Gambling Systems for Favorable Games "(L Breiman)"Optimal Gambling Systems for Favorable Games "(E O Thorp)"Portfolio Choice and the Kelly Criterion "(E O Thorp)"Optimal Investment and Consumption Strategies under Risk for a Class of Utility Functions "(N H Hakansson)"On Optimal Myopic Portfolio Policies, with and without Serial Correlation of Yields "(N H Hakansson)"Evidence on the ?Growth-Optimum-Model? "(R Roll)""Classic Papers and Theories: "Introduction to the Classic Papers and TheoriesCompetitive Optimality of Logarithmic Investment "(R M Bell and T M Cover)"A Bound on the Financial Value of Information "(A R Barron and T M Cover)"Asymptotic Optimality and Asymptotic Equipartition Properties of Log-Optimum Investment "(P H Algoet and T M Cover)"Universal Portfolios "(T M Cover)"The Cost of Achieving the Best Portfolio in Hindsight "(E Ordentlich and T M Cover)"Optimal Strategies for Repeated Games "(M Finkelstein and R Whitley)"The Effect of Errors in Means, Variances and Co-Variances on Optimal Portfolio Choice "(V K Chopra and W T Ziemba)"Time to Wealth Goals in Capital Accumulation "(L C MacLean, W T Ziemba, and Y Li)"Survival and Evolutionary Stability of Rule the Kelly "(I V Evstigneev, T Hens, and K R Schenk-Hopp‚)"Application of the Kelly Criterion to Ornstein-Uhlenbeck Processes "(Y Lv and B K Meister)""The Relationship of Kelly Optimization to Asset Allocation: "Introduction to the Relationship of Kelly Optimization to Asset AllocationSurvival and Growth with a Liability: Optimal Portfolio Strategies in Continuous Time "(S Browne)"Growth versus Security in Dynamic Investment Analysis "(L C MacLean, W T Ziemba, and G Blazenko)"Capital Growth with Security "(L C MacLean, R Sanegre, Y Zhao, and W T Ziemba)"

Author: Steven E. Shreve
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 48

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Abstract: "An agent can invest in a high-yield bond and a low-yield bond, holding either long or short positions in either asset. Any movement of money between these two assets incurs a transaction cost proportional to the size of the transaction. The low-yield bond is liquid in the sense that wealth invested in this bond can be consumed directly without a transaction cost; wealth invested in the high-yield bond can be consumed only by first moving it into the low-yield bond. The problem of optimal consumption and investment on an infinite planning horizon is solved for a class of utility functions larger than the class of power functions."

Author: W. T. Ziemba
Publisher: Academic Press
ISBN: 1483273997
Category : Business & Economics
Languages : en
Pages : 736

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Stochastic Optimization Models in Finance focuses on the applications of stochastic optimization models in finance, with emphasis on results and methods that can and have been utilized in the analysis of real financial problems. The discussions are organized around five themes: mathematical tools; qualitative economic results; static portfolio selection models; dynamic models that are reducible to static models; and dynamic models. This volume consists of five parts and begins with an overview of expected utility theory, followed by an analysis of convexity and the Kuhn-Tucker conditions. The reader is then introduced to dynamic programming; stochastic dominance; and measures of risk aversion. Subsequent chapters deal with separation theorems; existence and diversification of optimal portfolio policies; effects of taxes on risk taking; and two-period consumption models and portfolio revision. The book also describes models of optimal capital accumulation and portfolio selection. This monograph will be of value to mathematicians and economists as well as to those interested in economic theory and mathematical economics.

Author: John Eatwell
Publisher: Springer
ISBN: 1349202134
Category : Business & Economics
Languages : en
Pages : 289

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Book Description
This is an excerpt from the 4-volume dictionary of economics, a reference book which aims to define the subject of economics today. 1300 subject entries in the complete work cover the broad themes of economic theory. This extract concentrates on finance.

Author: Sudipto Bhattacharya
Publisher: World Scientific
ISBN: 9812701028
Category : Business & Economics
Languages : en
Pages : 387

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The first edition of Theory of Valuation is a collection of important papers in the field of theoretical financial economics published from 1973 to 1986, and original accompanying essays contributed by eminent researchers including Robert C Merton, Edward C Prescott, Stephen A Ross, and Joseph E Stiglitz. Since then, with the perspective of major theoretical strides in the field, the book has more than fulfilled its original expectations. The realization that it remains today a compendium of classic articles and a must-read for any serious student in theoretical financial economics, has prompted the publication of a new edition. This second edition presents a summary statement of significant research in theoretical financial economics for both the specialist and non-specialist financial economist. It also provides material for PhD-level courses covering valuation theory, and elective reading for advanced MasterOCOs and undergraduate courses. In addition to reproducing the original contributions, this edition includes the seminal paper by Edward C Prescott and Rajnish Mehra, OC Recursive Competitive Equilibrium: The Case of Homogeneous Households, OCO originally published in Econometrica in 1980."

Author: Sudipto Bhattacharya
Publisher: World Scientific
ISBN: 9814480088
Category : Business & Economics
Languages : en
Pages : 387

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Book Description
The first edition of Theory of Valuation is a collection of important papers in the field of theoretical financial economics published from 1973 to 1986, and original accompanying essays contributed by eminent researchers including Robert C Merton, Edward C Prescott, Stephen A Ross, and Joseph E Stiglitz.Since then, with the perspective of major theoretical strides in the field, the book has more than fulfilled its original expectations. The realization that it remains today a compendium of classic articles and a must-read for any serious student in theoretical financial economics, has prompted the publication of a new edition.This second edition presents a summary statement of significant research in theoretical financial economics for both the specialist and non-specialist financial economist. It also provides material for PhD-level courses covering valuation theory, and elective reading for advanced Master's and undergraduate courses.In addition to reproducing the original contributions, this edition includes the seminal paper by Edward C Prescott and Rajnish Mehra, “Recursive Competitive Equilibrium: The Case of Homogeneous Households,” originally published in Econometrica in 1980.

Author: Southwest Fisheries Center (U.S.)
Publisher:
ISBN:
Category : Fisheries
Languages : en
Pages : 1074

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