AN INTRODUCTION TO MERTON'S PORTFOLIO PROBLEM
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
In financial mathematics, Merton's portfolio problem is a statement of an
investor's problem to allocate his wealth between risk-free and risky assets as to
optimize the growth. The purpose of this report is to introduce and explain the
fundamental terms and mathematics included in the problem. Further the
investor's wealth and risk preferences are studied under a few assumptions. The
qualitative properties of the optimal allocation are analysed in the wealth and time perspective by examining the behaviour of introduced auxiliary functions. It turns out that the properties of the investors risk preferences will have direct consequences on the behaviour of the optimal allocation.
Place, publisher, year, edition, pages
2014. , 24 p.
Engineering and Technology
IdentifiersURN: urn:nbn:se:kth:diva-147360OAI: oai:DiVA.org:kth-147360DiVA: diva2:729838