The problem of determining specific utility preference from observed optimal resource allocation procedures is considered. In special cases this is solved completely. Partial solutions and their limitations in this process are also discussed.

Portfolio theory covers different approaches to the construction of a portfolio offering maximum expected returns for a given level of risk tolerance where the goal is to find the optimal investment rule. Each investor has a certain utility for money which is reflected by the choice of a utility...

A discrete-time model of portfolio optimization is studied under the effects of proportional transaction costs. A general class of underlying probability distributions is assumed for the returns of the asset prices. An investor with an exponential utility function seeks to maximize the utility...

In this article, we examine the problem of evaluating the option price of a European call option written on <italic>N</italic> underlying assets when there are proportional transaction costs in the market. Since the portfolio under consideration consists of multiple risky assets, which makes numerical methods...

In this paper we examine the Akian, Menaldi and Sulem (1996) model for the optimal management of a portfolio, when there are transaction costs which are equal to a fixed percentage of the amount transacted. We analyse this model in the realistic limit of small transaction costs. Although the...

Barrier options are considered for Asian options using a differential equation method. Solutions are obtained in the form of Fourier series for barriers which expand or contract as they approach maturity. Rigorous bounds are obtained. It is shown that by differentiating with respect to a...

A crucial assumption in the Black-Scholes theory of options pricing is the no transaction costs assumption. However, following such a strategy in the presence of transaction costs would lead to immediate ruin. This paper presents a stochastic control approach to the pricing and hedging of a...

Option pricing theory is considered when the underlying asset price satisfies a stochastic differential equation which is driven by random motions generated by stable distributions. The properties of the stable distributions are discussed and their connection with the theory of fractional...

The solution to the intertemporal optimal portfolio selection and consumption rule with small transaction costs is derived via the use of perturbation analysis for the two assets portfolio, one risky and one riskfree. This methodology allows us to apply a broader specification for the function...