Optimal multi-period consumption and investment with short-sale constraints

Date
2014-03
Authors
Arısoy, Y. E.
Altay-Salih, A.
Pınar, M. Ç.
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Finance Research Letters
Print ISSN
1544-6123
Electronic ISSN
Publisher
Elsevier
Volume
11
Issue
1
Pages
16 - 24
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
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Abstract

This article examines agents’ consumption-investment problem in a multi-period pure exchange economy where agents are constrained with the short-sale of state-dependent risky contingent claims. In equilibrum, agents hold options written on aggregate consumption in their optimal portfolios. Furthermore, under the specific case of quadratic utility, the optimal risk-sharing rule derived for the pricing agent leads to a multifactor conditional consumption-based capital asset pricing model (CCAPM), where excess option returns appear as factors.

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Book Title
Keywords
Options, Optimization, Short-sales, Consumption-based Capm
Citation
Published Version (Please cite this version)