Optimal dynamic trading strategies

Published

Journal Article

This article presents a straightforward technique for computing solutions to discrete, multi-period consumption/investment problems. It solves for the optimal stochastic consumption plans, as well as the optimal dynamic trading strategies that maximize utility for an individual. The technique permits general utility functions that may or may not be time-separable. It also allows general changes in the investment opportunity set and allows the user to impose upper and lower bounds on trading behaviour. Divergent borrowing and lending rates can be handled, as can stochastic labour income risks. Computed solutions verify the predictions of well-known intertemporal works by Merton, Breeden and others. © Banca Monte dei Paschi di Siena SpA, 2004.

Full Text

Duke Authors

Cited Authors

  • Breeden, DT

Published Date

  • January 1, 2004

Published In

Volume / Issue

  • 33 / 1

Start / End Page

  • 55 - 81

International Standard Serial Number (ISSN)

  • 0391-5026

Digital Object Identifier (DOI)

  • 10.1111/j.0391-5026.2004.00125.x

Citation Source

  • Scopus