Power Utility Maximization in Discrete-Time and Continuous-Time Exponential Levy Models
Portfolio Management
2012-04-27 v3 Computational Finance
Pricing of Securities
Abstract
Consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Levy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid. Under minimal assumptions we prove convergence of the optimal discrete-time strategies to the continuous-time counterpart. In addition, we provide and compare qualitative properties of the discrete-time and continuous-time optimizers.
Cite
@article{arxiv.1103.5575,
title = {Power Utility Maximization in Discrete-Time and Continuous-Time Exponential Levy Models},
author = {Johannes Temme},
journal= {arXiv preprint arXiv:1103.5575},
year = {2012}
}
Comments
18 pages, to appear in Mathematical Methods of Operations Research. The final publication is available at springerlink.com