Optimal harvesting when the exchange rate is a semimartingale

E. R. Offen, E. M. Lungu

Research output: Contribution to journalArticle

Abstract

We consider harvesting in the Black-Scholes Quanto Market when the exchange rate is being modeled by the process E t = E 0 exp { X t }, where X t is a semimartingale, and we ask the following question: What harvesting strategy * and the value function maximize the expected total income of an investment? We formulate a singular stochastic control problem and give sufficient conditions for the existence of an optimal strategy. We found that, if the value function is not too sensitive to changes in the prices of the investments, the problem reduces to that of Lungu and ksendal. However, the general solution of this problem still remains elusive.

Original languageEnglish
Article number942478
JournalInternational Journal of Stochastic Analysis
Volume2011
DOIs
Publication statusPublished - Dec 1 2011

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Optimal Harvesting
Semimartingale
Exchange rate
Harvesting
Value Function
Singular Stochastic Control
Black-Scholes
Optimal Strategy
General Solution
Control Problem
Maximise
Sufficient Conditions
Strategy
Market

All Science Journal Classification (ASJC) codes

  • Analysis
  • Statistics and Probability
  • Modelling and Simulation
  • Applied Mathematics

Cite this

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Optimal harvesting when the exchange rate is a semimartingale. / Offen, E. R.; Lungu, E. M.

In: International Journal of Stochastic Analysis, Vol. 2011, 942478, 01.12.2011.

Research output: Contribution to journalArticle

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