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2 edition of Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets found in the catalog.

Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets

George Chacko

Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets

  • 67 Want to read
  • 22 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Assets (Accounting) -- Prices -- Forecasting.,
  • Stock price forecasting.,
  • Portfolio management.

  • Edition Notes

    StatementGeorge Chacko, Luis M. Viceira.
    SeriesNBER working paper series -- no. 7377, Working paper series (National Bureau of Economic Research) -- working paper no. 7377.
    ContributionsViceira, Luis M., National Bureau of Economic Research.
    The Physical Object
    Pagination48, [8] p. :
    Number of Pages48
    ID Numbers
    Open LibraryOL22393998M

    portfolio optimization with bounded shortfall risks”, Stochastic analysis and applications, Vol. 23, No. 3, pp. [6] Hibiki, N. (), “Multi-period stochastic optimization models for. NBER Book Series Tax Policy and the Economy, 26, Pp. “ Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets.” Review of Financial Studies, 18, 4. PDF. John Campbell, George Chacko, Jorge Rodriguez, and Luis Viceira. On the Hamilton-Jacobi-Bellman Equation for an Optimal Consumption Problem Hamilton-Jacobi-Bellman equation for an optimal consumption problem: I. Existence of Solution, submitted. and (), On the portfolio choice with stochastic volatility in incomplete markets, Rev. Financ. Stud. 18, Jun Liu ( We consider that the insurer purchases excess-of-loss reinsurance and invests its wealth in the constant elasticity of variance (CEV) stock market. We model risk process by Brownian motion with drift and study the optimization problem of maximizing the exp.


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Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets by George Chacko Download PDF EPUB FB2

Issued in October NBER Program (s): Asset Pricing Program. This paper analyzes optimal portfolio choice and consumption with stochastic volatility in incomplete markets. Using the Duffie-Epstein () formulation of recursive utility in continuous time, it shows that the optimal portfolio demand for stocks under stochastic volatility varies strongly with the investor's coefficient Cited by: George Chacko and Luis Viceira.

“Dynamic Consumption Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets book Portfolio Choice with Stochastic Volatility in Incomplete Markets.” Review of Financial Studies, 18, 4. In a papers closely related to ours, Liu () examines the optimal allocation to stocks when stock return volatility is stochastic.

4 The paper provides exact analytical solutions in an incomplete markets setting for investors with power utility defined over terminal wealth, and specifications of stochastic volatility which are slightly different from the ones in this by: Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets.

George Chacko Harvard University Luis M. Viceira Harvard University, CEPR, and NBER. This paper examines the optimal consumption and portfolio-choice problem of long- horizon investors who have access to a riskless asset with constant return and a risky asset (‘‘stocks’’) with constant expected return and time-varying precision—the reci- procal of volatility.

with Stochastic Volatility in Incomplete Markets This paper examines the optimal consum ption and portfolio choice problem of long-horizon i nvestors who ha ve access to a riskless asset with constant.

Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets Article in Review of Financial Studies 18(4) May with 20 Reads How we measure 'reads'. George CHACKO & Luis M. VICEIRA, "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," FAME Research Paper Series rp11, International Center for Financial Asset Management and Engineering.

George Chacko & Luis M. Viceira, Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets George Chacko Harvard University Luis M. Viceira Harvard University, CEPR, and NBER This paper examines the optimal consumption and portfolio-choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky.

Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets George CHACKO Harvard University Luis M. VICEIRA Harvard University and NBER INTERNATIONAL CENTER FOR FINANCIAL ASSET MANAGEMENT AND ENGINEERING Research Paper N° with Stochastic Volatility in Incomplete Markets This paper examines the optimal consumption and portfolio choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset (‘stocks’) with constant expected return and time varying precision – the reciprocal of volatility.

Markets are incomplete, andCited by: George Chacko & Luis M. Viceira, "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," Review of Financial Studies, Society for Financial Studies, vol.

18(4), pages This paper studies a continuous–time intertemporal consumption and portfolio choice problem when a long–horizon investor who has recursive preferences cannot exactly observe the expected returns of the risky asset.

L.M. ViceiraDynamic consumption and portfolio choice with stochastic volatility in incomplete markets. Rev. Financ. Stud Author: Hyun-Tak Lee. BibTeX @MISC{Chacko03dynamicconsumption, author = {George Chacko and Luis M. Viceira}, title = {Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets }.

Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets. This paper examines the optimal consumption and portfolio choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset (‘stocks’) with constant expected return and time varying precision Author: George Chacko and Luis M Viceira.

Portfolio Choice with Stochastic Investment Opportunities: a User’s Guide Ren Liuy Johannes Muhle-Karbez November 7, Abstract This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability.

It Cited by: Chacko, George, and Luis M. Viceira. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets." Review of Financial Stud no. 4 (Winter Cited by: Dynamic Consumption and Portfolio Choice with Ambiguity about Stochastic Volatility Gonçalo Faria FEP‐UP, CEF‐UP, RGEA‐ João Correia ‐ da ‐ Silva.

FEP‐UP, CEF‐UP. Cláudia Ribeiro. FEP‐UP, CEF‐UP. World Congress of the Bachelier. “Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets.” The Review of Financial Studies 18 (4): –] found that intertemporal hedging demand (required by investors for protection against adverse changes in volatility) is empirically small even for highly risk-averse by: 3.

As an innovation to, Chacko and Viceira concerned the dynamic consumption and portfolio selection problem with stochastic volatility in incomplete markets. On the latest advance of reinsurance-investment problems with the Heston model, the interested readers can refer to the works of Li et al.

[ 18 ], Yi et al. [ 19 ], Zhao et al. [ 20 ], and Cited by: 1. In this paper, ambiguity about stochastic variance of the risky asset's return is introduced in the model of Chacko and Viceira [10] for dynamic consumption and portfolio choice. We nd that, with investors being able to update their portfolio continuously (as a function of.

Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets The Review of Financial Studies, Vol.

18, Issue 4, pp. Posted: 29 Feb Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets by George Chacko, Luis M.

Viceira, Abstract - Cited by (13 self) - Add to MetaCart. Chacko, G. and L. Viceira:`Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets'. The Review of Financial Studies 18 (4), Cited by: 3.

In dynamic portfolio choice problems, stochastic state variables such as stochastic volatility lead to adjustments of the optimal stock demand referred to as hedge terms or Merton-Breeden terms.

By deriving an explicit solution in a two-agent framework with a stochastic opportunity set, we show that relative wealth concerns give rise to new.

Get this from a library. Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets. [George Chacko; Luis M Viceira; National Bureau of Economic Research.]. The goal of this paper is to solve an optimal consumption-investment problem in the context of an incomplete financial market.

The model is a generalization of the Black and Scholes diffusion model, where the coefficients of the diffusion modelling the stock's price depend on some stochastic Cited by:   Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets. By George Chacko and Luis M.

Viceira. Variable Selection for Portfolio Choice Cited by: Optimal Portfolio Stochastic Volatility Incomplete Market Stochastic Partial Differential Equation Portfolio Choice These keywords were added by machine and not by the authors.

This process is experimental and the keywords may be updated as the learning algorithm by:   OPTIMAL INVESTMENT AND CONSUMPTION WITH STOCHASTIC FACTOR AND DELAY - Volume 61 Issue 1 - L. LI, H. “ Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets ”, Rev.

Financ. Stud. 18 Author: L. Li, Hui Mi. We are concerned with an investment and consumption problem with stochastic interest rate and stochastic volatility, in which interest rate dynamic is described by the Cox-Ingersoll-Ross (CIR) model and the volatility of the stock is driven by Heston’s stochastic volatility model.

We apply stochastic optimal control theory to obtain the Hamilton-Jacobi-Bellman (HJB) equation for the value Cited by: 9. George Chacko and Luis M.

Viceira, Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets, Review of Financial Studies, 18, 4, (), (). Crossref Marco Aiolfi and Carlo A. Favero, Model uncertainty, thick modelling and the predictability of stock returns, Journal of Forecasting, 24, 4, ( There is a large literature on portfolio choice (see, e.g., Kogan and Uppal () and Campbell and Viceira () for a survey), but relatively few works study optimal dynamic portfolio choice with stochastic variance of the risky asset’s return.

Some examples are Kim and Omberg () and Chacko and Viceira (), with incomplete markets. Abstract. We develop a new framework for intertemporal portfolio choice when the covariance matrix of returns is stochastic. An important contribution of this framework is that it allows to derive optimal portfolio implications for economies in which the degree of correlation across different industries, countries, and asset classes is time-varying and by: mal consumption and investment SV model.

Chacko and Viceira[2] study dynamic consumption and portfolio choice with stochastic volatility. One important class of models is related to utility maximization. In such models the objective is to maximize the utility of the wealth (either cumulative or of the terminal wealth).File Size: KB.

However, this property need not hold in dynamic portfolio choice theory; as we pointed earlier, the stock portfolio is negative for small risk aversion in the stochastic volatility model. Why an agent with small (but positive) risk aversion would short a risky asset with a positive premium can be understood as by: Abstract: This paper considers an optimal portfolio choice problem under Stein-Stein stochastic volatility model and dynamic VaR constraint.

The investor aims to maximize the expected power utility of the terminal wealth, and the financial market consists of one risk-free asset and one risky asset whose price process is described by Stein-Stein stochastic volatility model.

In an incomplete market, we study the optimal consumption-portfolio decision of an investor with recursive preferences of Epstein–Zin type. Applying a classical dynamic programming approach, we formulate the associated Hamilton–Jacobi–Bellman equation and provide a suitable verification theorem.

The proof of this verification theorem is complicated by the fact that the Cited by: Portfolio Optimization & Stochastic Volatility Asymptotics and in the context of incomplete markets with stochastic volatility. We achieve this by driving volatility frictions, particularly by dynamic programming methods, we refer to the recent book by Pham [].

Chacko, G and Viceira, LM () Dynamic consumption and portfolio choice with stochastic volatility in incomplete markets.

Review of Financial Stud – Chai, J, Horneff, WJ, Maurer, RH and Mitchell, OS () Optimal portfolio choice over the life cycle with flexible work, endogenous retirement, and lifetime : Servaas van Bilsen, A.

Lans Bovenberg. George Chacko and Luis M. Viceira, Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets, Review of Financial Studies, 18, 4, (), (). Crossref Michael D.

Bergmann and C. Thomas Howard, Multi-Index Shrinkage Estimation, The Journal of Wealth Management, 8, 1, (73), (). () A Stochastic Dynamic Programming Approach Based on Bounded Rationality and Application to Dynamic Portfolio Choice. Discrete Dynamics in Nature and Society() Portfolio Selection with Options and Transaction by: Stochastic dynamic programming 3.

Single-period portfolio choice 4. Utility functions 5. A general approach to modeling utility 6. Dynamic portfolio choice Dynamic stochastic programming and Monte Carlo sampling Serially dependent asset returns A fast method for normally distributed asset returns Cited by: Portfolio Selection in Stochastic Environments Jun Liu University of California, San Diego In this article, I explicitly solve dynamic portfolio choice problems, up to the solution of an ordinary differential equation (ODE), when the asset returns are quadratic and the agent has a constant relative risk aversion (CRRA) coefficient.

My solution.