Risk averse asymptotics in a Black-Scholes market on a finite time horizon

Peter Grandits; Stefan Thonhauser

doi:10.1007/s00186-011-0347-4

Risk averse asymptotics in a Black-Scholes market on a finite time horizon

Peter Grandits, Stefan Thonhauser^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We consider the optimal investment and consumption problem in aBlack-Scholes market, if the target functional is given by expected discounted utility of consumption plus expected discounted utility of terminal wealth. We investigate the behaviour of the optimal strategies, if the relative risk aversion tends to infinity. It turns out that the limiting strategies are: do not invest at all in the stock market and keep the rate of consumption constant!

Original language	English
Pages (from-to)	21-40
Number of pages	20
Journal	Mathematical Methods of Operations Research
Volume	74
Issue number	1
DOIs	https://doi.org/10.1007/s00186-011-0347-4
Publication status	Published - 1 Aug 2011
Externally published	Yes

Keywords

Black-Scholes Market
Risk aversion asymptotics
Utility maximization

ASJC Scopus subject areas

Software
Management Science and Operations Research
Mathematics(all)

Fields of Expertise

Information, Communication & Computing

Access to Document

10.1007/s00186-011-0347-4

Cite this

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Risk averse asymptotics in a Black-Scholes market on a finite time horizon

Abstract

Keywords

ASJC Scopus subject areas

Fields of Expertise

Access to Document

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