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Consumption And Portfolio Policies With Incomplete Markets And Short‐Sale Constraints In The Finite‐Dimensional Case: Some Remarks

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  • Bruno Girotto
  • Fulvio Ortu

Abstract

This paper extends He and Pearson's (1991) martingale approach to the study of optimal intertemporal consumption and portfolio policies with incomplete markets and short‐sale constraints to a framework in which no assumptions are made on the price process for the securities. We show how both their characterization of the budget‐feasible set and duality result can be extended to account for an unbounded set II of Arrow‐Debreu state prices compatible with the arbitrage‐free assumption. We also supply a (fairly general) sufficient condition for II to be bounded, as required in their setting.

Suggested Citation

  • Bruno Girotto & Fulvio Ortu, 1994. "Consumption And Portfolio Policies With Incomplete Markets And Short‐Sale Constraints In The Finite‐Dimensional Case: Some Remarks," Mathematical Finance, Wiley Blackwell, vol. 4(1), pages 69-73, January.
    • Handle: RePEc:bla:mathfi:v:4:y:1994:i:1:p:69-73
    DOI: 10.1111/j.1467-9965.1994.tb00051.x
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    Cited by:

    1. Ziehaus Christina, 2012. "A note on optimal consumption and investment in a geometric Ornstein–Uhlenbeck market," Statistics & Risk Modeling, De Gruyter, vol. 29(3), pages 269-280, August.
    2. Duffie, Darrell, 2003. "Intertemporal asset pricing theory," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 11, pages 639-742, Elsevier.

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