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European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk …-minimizing strategy. Furthermore, since the mean-variance tradeoff process is deterministic in our setup, the minimal martingale- and … variance-optimal martingale measures coincide. Consequently, the mean-variance optimal strategy is easily constructed. Simple …
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We present the optimal consumption and investment strategy for an investor, endowed with labor income, searching to maximize utility from consumption and terminal wealth when facing a binding capital constraint of a European (constraint on terminal wealth) or an American (constraint on the...
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