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An Extension of Some Results Due to Cox and Leland

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DOI: 10.4236/jmf.2013.34043    3,107 Downloads   4,787 Views  


We investigate an optimal portfolio allocation problem between a risky and a risk-free asset, as in [1]. They obtained explicit conditions for path-independence and optimality of allocation strategies when the price of the risky asset follows a geometric Brownian motion with constant asset characteristics. This paper analyzes and extends their results for dynamic investment strategies by allowing for non-constant returns and volatility. We adopt a continuous-time approach and appeal to well established results in stochastic calculus for doing so.

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The authors declare no conflicts of interest.

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A. Leung and W. Shi, "An Extension of Some Results Due to Cox and Leland," Journal of Mathematical Finance, Vol. 3 No. 4, 2013, pp. 416-425. doi: 10.4236/jmf.2013.34043.


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