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Article: Optimal portfolio and consumption for a Markovian regime-switching jump-diffusion process
Title | Optimal portfolio and consumption for a Markovian regime-switching jump-diffusion process |
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Authors | |
Keywords | portfolio and consumption jump-diffusion process regime switching Hamilton–Jacobi–Bellman equation stochastic maximum principle |
Issue Date | 2021 |
Publisher | Cambridge University Press. The Journal's web site is located at http://journal.austms.org.au/ojs/index.php/ANZIAMJ/index |
Citation | The ANZIAM Journal, 2021, v. 63 n. 3, p. 308-332 How to Cite? |
Abstract | We consider the optimal portfolio and consumption problem for a jump-diffusion process with regime switching. Under the criterion of maximizing the expected discounted total utility of consumption, two methods, namely, the dynamic programming principle and the stochastic maximum principle, are used to obtain the optimal result for the general objective function, which is the solution to a system of partial differential equations. Furthermore, we investigate the power utility as a specific example and analyse the existence and uniqueness of the optimal solution. Under the constraints of no-short-selling and nonnegative consumption, closed-form expressions for the optimal strategy and the value function are derived. Besides, some comparisons between the optimal results for the jump-diffusion model and the pure diffusion model are carried out. Finally, we discuss our optimal results in some special cases. |
Persistent Identifier | http://hdl.handle.net/10722/306883 |
ISSN | 2023 Impact Factor: 1.0 2023 SCImago Journal Rankings: 0.183 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Zhang, C | - |
dc.contributor.author | Liang, Z | - |
dc.contributor.author | Yuen, KC | - |
dc.date.accessioned | 2021-10-22T07:40:59Z | - |
dc.date.available | 2021-10-22T07:40:59Z | - |
dc.date.issued | 2021 | - |
dc.identifier.citation | The ANZIAM Journal, 2021, v. 63 n. 3, p. 308-332 | - |
dc.identifier.issn | 1446-1811 | - |
dc.identifier.uri | http://hdl.handle.net/10722/306883 | - |
dc.description.abstract | We consider the optimal portfolio and consumption problem for a jump-diffusion process with regime switching. Under the criterion of maximizing the expected discounted total utility of consumption, two methods, namely, the dynamic programming principle and the stochastic maximum principle, are used to obtain the optimal result for the general objective function, which is the solution to a system of partial differential equations. Furthermore, we investigate the power utility as a specific example and analyse the existence and uniqueness of the optimal solution. Under the constraints of no-short-selling and nonnegative consumption, closed-form expressions for the optimal strategy and the value function are derived. Besides, some comparisons between the optimal results for the jump-diffusion model and the pure diffusion model are carried out. Finally, we discuss our optimal results in some special cases. | - |
dc.language | eng | - |
dc.publisher | Cambridge University Press. The Journal's web site is located at http://journal.austms.org.au/ojs/index.php/ANZIAMJ/index | - |
dc.relation.ispartof | The ANZIAM Journal | - |
dc.rights | The ANZIAM Journal. Copyright © Cambridge University Press. | - |
dc.rights | This article has been published in a revised form in [Journal] [http://doi.org/XXX]. This version is free to view and download for private research and study only. Not for re-distribution, re-sale or use in derivative works. © copyright holder. | - |
dc.subject | portfolio and consumption | - |
dc.subject | jump-diffusion process | - |
dc.subject | regime switching | - |
dc.subject | Hamilton–Jacobi–Bellman equation | - |
dc.subject | stochastic maximum principle | - |
dc.title | Optimal portfolio and consumption for a Markovian regime-switching jump-diffusion process | - |
dc.type | Article | - |
dc.identifier.email | Yuen, KC: kcyuen@hku.hk | - |
dc.identifier.authority | Yuen, KC=rp00836 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1017/S1446181121000122 | - |
dc.identifier.scopus | eid_2-s2.0-85111070999 | - |
dc.identifier.hkuros | 328391 | - |
dc.identifier.volume | 63 | - |
dc.identifier.issue | 3 | - |
dc.identifier.spage | 308 | - |
dc.identifier.epage | 332 | - |
dc.identifier.isi | WOS:000716994800004 | - |
dc.publisher.place | United Kingdom | - |