All Questions
Tagged with optimization portfolio-theory
7 questions
3
votes
0
answers
114
views
How can you interpret one of the parameters of optimal consumption at the Merton portfolio problem?
Statement: Let the dynamics of wealth of the agent satisfy
$$dX_{t} =
\pi_tX_t\Big(\mu dt+\sigma dB_{t}\Big)- c_t X_t dt, \qquad \textrm{with}\quad X_0=x_0 \in \mathbb{R},$$
where $(\pi,c)$ is an ...
- 31
3
votes
3
answers
1k
views
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
4
votes
1
answer
573
views
Calculating mean variance portfolio with risk aversion parameter
I want to calculate the classic mean variance portfolio (Markowitz) with a risk aversion parameter $\gamma$.
I have the following problem where I want to maximize:
$max(x_t) \ \ x_t^T\mu_t - \frac{...
- 41
1
vote
1
answer
224
views
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
views
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
views
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,...
- 9,385