DocumentCode :
2081905
Title :
Optimal consumption and portfolio control for jump-diffusion stock process with log-normal jumps
Author :
Hanson, F.B. ; Westman, J.J.
Author_Institution :
Lab. for Adv. Comput., Illinois Univ., Chicago, IL, USA
Volume :
5
fYear :
2002
fDate :
2002
Firstpage :
4256
Abstract :
A computational solution is found for a optimal consumption and portfolio policy problem in which the underlying stock satisfies a geometric jump-diffusion in which both the diffusion and jump amplitude are log-normally distributed. The optimal objective is to maximize the expected, discounted utility of terminal wealth and the cumulative discounted utility of instantaneous consumption. The jump-diffusion allows for a more realistic distribution, skewed toward negative jumps and having leptokurtic behavior in which the tails are thicker so that the distribution is more slender around the peak than normal. Computational issues pertinent to jump-diffusion calculations are discussed.
Keywords :
diffusion; dynamic programming; investment; log normal distribution; optimal control; stock markets; computational solution; cumulative discounted utility; expected discounted utility; geometric jump-diffusion; instantaneous consumption; jump-diffusion stock process; leptokurtic behavior; log-normal distribution; log-normal jumps; negative jumps; optimal consumption; portfolio control; skewed distribution; terminal wealth; Distributed computing; Electronic mail; Instruments; Investments; Optimal control; Portfolios; Probability distribution; Processor scheduling; Stochastic processes; Uniform resource locators;
fLanguage :
English
Publisher :
ieee
Conference_Titel :
American Control Conference, 2002. Proceedings of the 2002
ISSN :
0743-1619
Print_ISBN :
0-7803-7298-0
Type :
conf
DOI :
10.1109/ACC.2002.1024600
Filename :
1024600
Link To Document :
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