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Optimal Investment with Stocks and Derivatives

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  • Pietro Siorpaes

Abstract

This paper studies the problem of maximizing expected utility from terminal wealth combining a static position in derivative securities, which we assume can be traded only at time zero, with a traditional dynamic trading strategy in stocks. We work in the framework of a general semi-martingale model and consider a utility function defined on the positive real line.

Suggested Citation

  • Pietro Siorpaes, 2012. "Optimal Investment with Stocks and Derivatives," Papers 1210.5466, arXiv.org, revised Oct 2013.
    • Handle: RePEc:arx:papers:1210.5466
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    References listed on IDEAS

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    1. Pietro Siorpaes, 2012. "Do arbitrage-free prices come from utility maximization?," Papers 1207.4749, arXiv.org, revised Oct 2013.
    2. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
    3. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    4. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-257, August.
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    Cited by:

    1. Pietro Siorpaes, 2013. "Optimal investment and price dependence in a semi-static market," Papers 1303.0237, arXiv.org, revised Oct 2013.

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