Optimal investment in derivative securities

@article{Carr2001OptimalII,
  title={Optimal investment in derivative securities},
  author={Peter Carr and Xing Jin and Dilip B. Madan},
  journal={Finance and Stochastics},
  year={2001},
  volume={5},
  pages={33-59}
}
We consider the problem of optimal investment in a risky asset, and in derivatives written on the price process of this asset, when the underlying asset price process is a pure jump L évy process. The duality approach of Karatzas and Shreve is used to derive the optimal consumption and investment plans. In our economy, the optimal derivative payoff can be constructed from dynamic trading in the risky asset and in European options of all strikes. Specific closed forms illustrate the optimal… CONTINUE READING
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