Jumps in an stochastic optimization: self-financing portfolio for risk averse investors: does bequest matter?

Gazioglu S., Bastiyali-Hafavi A., Sezgin O.

APPLIED ECONOMICS LETTERS, cilt.20, sa.8, ss.790-794, 2013 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 20 Sayı: 8
  • Basım Tarihi: 2013
  • Doi Numarası: 10.1080/13504851.2012.744158
  • Dergi Adı: APPLIED ECONOMICS LETTERS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.790-794
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

We optimized consumer/investor behaviour, subject to self-financing constraint by using stochastic dynamics system with jumps. Our aim in this article was to compare a stochastic optimization model with and without jumps in a self-financing portfolio model, for the risk averse investors. In this article, our contribution to the literature was to introduce an analytical solution of the utility maximizing model and to investigate the consequences of jumps and bequest to the economic system. A previous model by Gazioglu and Bastiyali-Hafavi (2010) used optimization, only with a Brownian motion during optimization. In this article, we introduced jump difussion to Brownian motion during optimization. We compared the model with and without jumps for the risk averse investors. Furthermore, as a form of wealth, we compared the results with and without bequest.