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Power Utility Maximization in Constrained Exponential L\'evy Models

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  • Marcel Nutz

Abstract

We study power utility maximization for exponential L\'evy models with portfolio constraints, where utility is obtained from consumption and/or terminal wealth. For convex constraints, an explicit solution in terms of the L\'evy triplet is constructed under minimal assumptions by solving the Bellman equation. We use a novel transformation of the model to avoid technical conditions. The consequences for q-optimal martingale measures are discussed as well as extensions to non-convex constraints.

Suggested Citation

  • Marcel Nutz, 2009. "Power Utility Maximization in Constrained Exponential L\'evy Models," Papers 0912.1885, arXiv.org, revised Sep 2010.
    • Handle: RePEc:arx:papers:0912.1885
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    File URL: http://arxiv.org/pdf/0912.1885
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    Cited by:

    1. Ariel Neufeld & Marcel Nutz, 2015. "Robust Utility Maximization with L\'evy Processes," Papers 1502.05920, arXiv.org, revised Mar 2016.

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