Skip to main content
Article thumbnail
Location of Repository

Optimal sure portfolio plans

By Lucien Foldes


This paper is a sequel to the author's "Certainty Equivalence in the Continuous-Time Portfolio-cum-Saving Model" in Applied Stochastic Analysis (eds. M. H. A. Davis and R. J. Elliot), where a model of optimal accumulation of capital and portfolio choice over an infinite horizon in continuous time was considered in which the vector process representing returns to investment is a general semimartingale with independent increments and the welfare functional has the discounted constant relative risk aversion (CRRA) form. A problem of optimal choice of a sure (i.e., nonrandom portfolio plan can be defined in such a way that solutions of this problem correspond to solutions of optimal choice of a portfolio-cum-saving plan, provided that the distant future is sufficiently discounted. This has been proved in the earlier paper, and is in part proved again here by different methods. Using the canonical representation of a PII-semimartingale, a formula of Lévy-Khinchin type is derived for the bilateral Laplace transform of the compound interest process generated by a sure portfolio plan. With its aid. the existence of an optimal sure portfolio plan is proved under suitable conditions, and various causes of nonexistence are identified. Programming conditions characterizing an optimal sure portfolio plan are also obtained

Topics: HG Finance, HB Economic Theory, QA Mathematics
Publisher: Blackwell
Year: 1991
DOI identifier: 10.1111/j.1467-9965.1991.tb00008.x
OAI identifier:
Provided by: LSE Research Online
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.blackwell-synergy.c... (external link)
  • (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.