PORTFOLIO DIVERSIFICATION WITH MARKOVIAN PRICES
Jan Palczewski
Jerzy Zabczyk
Abstract: The problem of constructing impulsive rebalancing of portfolios, introduced by
Pliska and Suzuki, is solved for models with general Markovian prices. Existence of
the optimal strategy is established and its structure described. Quasi-variational
inequalities determining the value function are deduced for multiplicative prices with
general Lévy noise and the case of Poissonian noise is considered in some detail.
2000 AMS Mathematics Subject Classification: 93E20, 91B28.
Key words and phrases: Impulsive control, portfolios, transaction costs, Lévy processes.