Power Utility Maximization in Constrained Exponential L\'evy Models
Portfolio Management
2012-12-21 v2 Optimization and Control
Pricing of Securities
Abstract
We study power utility maximization for exponential L\'evy models with portfolio constraints, where utility is obtained from consumption and/or terminal wealth. For convex constraints, an explicit solution in terms of the L\'evy triplet is constructed under minimal assumptions by solving the Bellman equation. We use a novel transformation of the model to avoid technical conditions. The consequences for q-optimal martingale measures are discussed as well as extensions to non-convex constraints.
Cite
@article{arxiv.0912.1885,
title = {Power Utility Maximization in Constrained Exponential L\'evy Models},
author = {Marcel Nutz},
journal= {arXiv preprint arXiv:0912.1885},
year = {2012}
}
Comments
22 pages; forthcoming in 'Mathematical Finance'