[Home ] [Archive]    
:: Volume 15, Issue 2 (Spring 2020) ::
J. Mon. Ec. 2020, 15(2): 123-134 Back to browse issues page
Optimal Portfolio Allocation with Price Limit Constraint
Gholamreza Keshavarz Haddad1 , Hadi Heidari 2
1- Graduate School of Management and Economics, Sharif University of Technology
2- Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran
Abstract:   (435 Views)
Daily price limits are adopted by many securities exchanges in countries such as the USA, Canada, Japan and various other countries in Europe and Asia, in order to increase the stability of the financial market. These limits confine the price of the financial asset during all trading stages of any trading day to a range, usually determined based on the previous day’s closing price. In this paper we study the portfolio optimization problem with impose the price limit constraint. The dynamic programming technique is applied to derive the Hamilton–Jacobi–Bellman equation and the method of Lagrange multiplier is used to tackle the constraint. Optimization problem solution results, using numerical method show that the equilibrium path of wealth and investment in risky assets has a different way than in the absence of price limits. 
Keywords: Optimal portfolio, limited prices, Dynamic programming
Full-Text [PDF 712 kb]   (361 Downloads)    
Type of Study: Original Research - Empirical | Subject: Microeconomics
Received: 14 Apr 2020 | Accepted: 1 Dec 2020 | Published: 22 Apr 2020
Add your comments about this article
Your username or Email:

CAPTCHA



XML     Print


Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

Keshavarz Haddad G, Heidari H. Optimal Portfolio Allocation with Price Limit Constraint. J. Mon. Ec.. 2020; 15 (2) :123-134
URL: http://jme.mbri.ac.ir/article-1-493-en.html


Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Volume 15, Issue 2 (Spring 2020) Back to browse issues page
Journal of Money and Economy Journal of Money And Economy
Persian site map - English site map - Created in 0.04 seconds with 29 queries by YEKTAWEB 4341