Closed-Form Optimal Strategies of Continuous-Time Options with Stochastic Differential Equations
Author
Source
Issue
Vol. 2017, Issue 2017 (31 Dec. 2017), pp.1-11, 11 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2017-07-02
Country of Publication
Egypt
No. of Pages
11
Main Subjects
Abstract EN
A continuous-time portfolio selection with options based on risk aversion utility function in financial market is studied.
The different price between sale and purchase of options is introduced in this paper.
The optimal investment-consumption problem is formulated as a continuous-time mathematical model with stochastic differential equations.
The prices processes follow jump-diffusion processes (Weiner process and Poisson process).
Then the corresponding Hamilton-Jacobi-Bellman (HJB) equation of the problem is represented and its solution is obtained in different conditions.
The above results are applied to a special case under a Hyperbolic Absolute Risk Aversion (HARA) utility function.
The optimal investment-consumption strategies about HARA utility function are also derived.
Finally, an example and some discussions illustrating these results are also presented.
American Psychological Association (APA)
Yan, Wei. 2017. Closed-Form Optimal Strategies of Continuous-Time Options with Stochastic Differential Equations. Complexity،Vol. 2017, no. 2017, pp.1-11.
https://search.emarefa.net/detail/BIM-1143584
Modern Language Association (MLA)
Yan, Wei. Closed-Form Optimal Strategies of Continuous-Time Options with Stochastic Differential Equations. Complexity No. 2017 (2017), pp.1-11.
https://search.emarefa.net/detail/BIM-1143584
American Medical Association (AMA)
Yan, Wei. Closed-Form Optimal Strategies of Continuous-Time Options with Stochastic Differential Equations. Complexity. 2017. Vol. 2017, no. 2017, pp.1-11.
https://search.emarefa.net/detail/BIM-1143584
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1143584