General Closed-Form Solutions to the Dynamic Optimization Problem in Incomplete Markets | Zendy

Moawia Alghalith | Zendy

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General Closed-Form Solutions to the Dynamic Optimization Problem in Incomplete Markets

Author(s) -

Moawia Alghalith

Publication year - 2011

Publication title -

applied mathematics

Language(s) - English

Resource type - Journals

eISSN - 2152-7393

pISSN - 2152-7385

DOI - 10.4236/am.2011.24054

Subject(s) - portfolio , mathematical optimization , incomplete markets , exponential function , portfolio optimization , consumption (sociology) , function (biology) , dynamic programming , optimization problem , computer science , mathematics , economics , microeconomics , mathematical analysis , social science , evolutionary biology , sociology , financial economics , biology

In this paper, we provide general closed-form solutions to the incomplete-market random-coefficient dynamic optimization problem without the restrictive assumption of exponential or HARA utility function. Moreover, we explicitly express the optimal portfolio as a function of the optimal consumption and show the impact of optimal consumption on the optimal portfolio

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