Abstract.
We consider the problem of maximizing the expected utility from consumption or terminal wealth in a market where logarithmic securities prices follow a Lévy process. More specifically, we give explicit solutions for power, logarithmic and exponential utility in terms of the Lévy-Khintchine triplet. In the first two cases, a constant fraction of current wealth should be invested in each of the securities, as is well-known for related discrete-time models and for Brownian motion. The situation is different for exponential utility.
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Manuscript received: October 1999 / Final version received: February 2000
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Kallsen, J. Optimal portfolios for exponential Lévy processes. Mathematical Methods of OR 51, 357–374 (2000). https://doi.org/10.1007/s001860000048
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DOI: https://doi.org/10.1007/s001860000048