Power Utility Maximization in Discrete-Time and Continuous-Time Exponential Levy Models

Details Power Utility Maximization in Discrete-Time and Continuous-Time Exponential Levy Models Power Utility Maximization in Discrete-Time and Continuous-Time Exponential Levy Models

2011-03-29

arxiv.org/abs/1103.5575v3

Economy

Quantitative Finance

Portfolio Management

18 pages, to appear in Mathematical Methods of Operations Research. The final publication is available at springerlink.com

Scientific paper

10.1007/s00186-012-0388-3

Consider power utility maximization of terminal wealth in a 1-dimensional continuous-time exponential Levy model with finite time horizon. We discretize the model by restricting portfolio adjustments to an equidistant discrete time grid. Under minimal assumptions we prove convergence of the optimal discrete-time strategies to the continuous-time counterpart. In addition, we provide and compare qualitative properties of the discrete-time and continuous-time optimizers.

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