scholarly journals Investor’s Power Utility Optimization with Consumption, Tax, Dividend and Transaction Cost under Constant Elasticity of Variance Model

2017 ◽  
Vol 4 (2) ◽  
pp. 1-12 ◽  
Author(s):  
Silas Ihedioha
Keyword(s):  
Transaction Cost ◽  
Consumption Tax ◽  
Power Utility ◽  
Variance Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Utility Optimization

scholarly journals Optimal pairs trading with time-varying volatility

2016 ◽  
Vol 03 (03) ◽  
pp. 1650023 ◽  
Author(s):  
Thomas Nanfeng Li ◽  
Agnès Tourin
Keyword(s):  
Generalized Method Of Moments ◽  
Fixed Time ◽  
Time Varying ◽  
Pairs Trading ◽  
Power Utility ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Control Techniques ◽  
Daily Frequency ◽  
Trading Model

In this paper, we propose a pairs trading model that incorporates a time-varying volatility of the constant elasticity of variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two cointegrated assets, we define the trading strategies as the portfolio weights maximizing the expected power utility from terminal wealth. We compute the optimal pairs strategies by using a finite difference method. Finally, we illustrate our results by conducting tests on historical market data at daily frequency. The parameters are estimated by the generalized method of moments.

Pricing American Options under the Constant Elasticity of Variance Model and Subject to Bankruptcy

2009 ◽  
Vol 44 (5) ◽  
pp. 1231-1263 ◽  
Author(s):  
João Pedro Vidal Nunes
Keyword(s):  
American Options ◽  
Asymptotic Properties ◽  
Variance Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Early Exercise ◽  
Exercise Boundary ◽  
And Diffusion

AbstractThis paper proposes an alternative characterization of the early exercise premium that is valid for any Markovian and diffusion underlying price process as well as for any parameterization of the exercise boundary. This new representation is shown to provide the best pricing alternative available in the literature for medium- and long-term American option contracts, under the constant elasticity of variance model. Moreover, the proposed pricing methodology is also extended easily to the valuation of American options on defaultable equity and possesses appropriate asymptotic properties.

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