All Questions
Tagged with optimization asset-pricing
7 questions
2
votes
0
answers
59
views
Habit formation ala Constantinides (1990)
Consider the following problem, from Constantinides (1990).
\begin{align}
V(W_0, x_0) \equiv \max_{c, \alpha} \mathrm{E}_0 \int_0^\infty e^{-\rho s}\gamma^{-1}[c(s) - x(s)]^\gamma \mathrm{d}s,
\end{...
2
votes
1
answer
73
views
Budget-feasible set in a portfolio choice problem
I am going through Duffie's Dynamic Asset Pricing book, and already ran into something that confused me on the third page. First, some definitions.
Let $\{1, \cdots, S\}$ be a finite set of states, $D$...
3
votes
3
answers
1k
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A question about Lagrange multiplier(when $\lambda=0$)
I need help in a maximization problem(finding the optimal investment portfolio).
where $R_s$ and $\Phi$ are $n$ by $1$, with other variables being scalars.
$C^s$ is consumption (or wealth) of an ...
- 131
1
vote
1
answer
224
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Derivative of CARA utility
Can someone help explain the passage here? I'm rusty with my linear algebra so the derivate of these transpose matrices isn't making any sense to me. A detailed explanation would be very much ...
- 237
2
votes
0
answers
401
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Calculating the optimal portfolio for an investor with quadratic utility
The problem is from Asset Pricing and Portfolio Theory by Back and can be found here.
The relevant info from section 2.5 can be found here. Given that we have the Expected value and the variance of ...
- 237
4
votes
1
answer
1k
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Portfolio choice problem of a CARA investor with n risky assets
Ok, I am working on a problem that consists of the following:
I am looking to solve the portfolio choice optimization problem (maximizing utility with a known utility function) in the case where all ...
- 237
5
votes
1
answer
113
views
Finding a maximal growth portfolio
I have the following problem that asks me to solve for the "maximal growth portfolio."
Suppose that the equilibrium stochastic discount factor evolves as
$$
\log S_{t+1} - \log S_t = \kappa_s(X_t,...
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