Optimal Portfolio and Consumption in a Switching Diffusion Market

Optimal Portfolio and Consumption in a Switching Diffusion Market

dc.creatorCajueiro, Daniel Oliveira
dc.creatorYoneyama, Takashi
dc.date2004-11-02
dc.date.accessioned2022-11-03T21:18:02Z
dc.date.available2022-11-03T21:18:02Z
dc.identifierhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2711
dc.identifier.urihttps://repositorioslatinoamericanos.uchile.cl/handle/2250/5047748
dc.descriptionThis paper addresses the problem of finding the optimal portfolio and consumption of a small agent in an economy. The novelty of this work is in considering that the financial market, in contrast to the celebrated Black-Scholes model, is composed of two sources of uncertainties: a Brownian motion and a continuous time Markov chain. While the Brownian motion intends to model the normal oscillations of the asset prices, the continuous time Markov chain aims at taking into account the abrupt variations that can occur in the parameters of the asset dynamics due to changes that take place in the state of the economy. The problem is formulated in terms of classical optimal stochastic control and the Hamilton-Jacobi-Bellman equation is solved to yield the solution.en-US
dc.descriptionThis paper addresses the problem of finding the optimal portfolio and consumption of a small agent in an economy. The novelty of this work is in considering that the financial market, in contrast to the celebrated Black-Scholes model, is composed of two sources of uncertainties: a Brownian motion and a continuous time Markov chain. While the Brownian motion intends to model the normal oscillations of the asset prices, the continuous time Markov chain aims at taking into account the abrupt variations that can occur in the parameters of the asset dynamics due to changes that take place in the state of the economy. The problem is formulated in terms of classical optimal stochastic control and the Hamilton-Jacobi-Bellman equation is solved to yield the solution.pt-BR
dc.formatapplication/pdf
dc.languageeng
dc.publisherSociedade Brasileira de Econometriaen-US
dc.relationhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2711/1650
dc.sourceBrazilian Review of Econometrics; Vol. 24 No. 2 (2004); 227–247en-US
dc.sourceBrazilian Review of Econometrics; v. 24 n. 2 (2004); 227–247pt-BR
dc.source1980-2447
dc.subjectContinuous Time Markov Chainen-US
dc.subjectFinancial Marketen-US
dc.subjectJump Processesen-US
dc.subjectOptimal Consumptionen-US
dc.subjectOptimal Portfolioen-US
dc.subjectOptimal Stochastic Control.en-US
dc.subjectG11en-US
dc.subjectContinuous Time Markov Chainpt-BR
dc.subjectFinancial Marketpt-BR
dc.subjectJump Processespt-BR
dc.subjectOptimal Consumptionpt-BR
dc.subjectOptimal Portfoliopt-BR
dc.subjectOptimal Stochastic Control.pt-BR
dc.subjectG11pt-BR
dc.titleOptimal Portfolio and Consumption in a Switching Diffusion Marketen-US
dc.titleOptimal Portfolio and Consumption in a Switching Diffusion Marketpt-BR
dc.typeinfo:eu-repo/semantics/article
dc.typeinfo:eu-repo/semantics/publishedVersion


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