Optimal consumption/investment problem with light stocks: A mixed continuous-discrete time approach
Castellano, R and Cerqueti, R (2012). Optimal consumption/investment problem with light stocks: A mixed continuous-discrete time approach. Applied Mathematics and Computation. 218 (12), pp. 6887-6898.
|Authors||Castellano, R and Cerqueti, R|
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.
|Keywords||Optimal consumption/ investment model; Monte Carlo simulations; Utility maximization; Thin stocks; Stochastic control theory; Dynamic programming; Jump-diffusion dynamics|
|Journal||Applied Mathematics and Computation|
|Journal citation||218 (12), pp. 6887-6898|
|Digital Object Identifier (DOI)||doi:10.1016/j.amc.2011.12.065|
|Publication process dates|
|Accepted||01 Jan 2012|
|Deposited||06 Apr 2020|
|Accepted author manuscript|
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