lambda_optimal: Lambda Optimal

In belangerjulie15/Optimisation.Power.Utility: Functions: Optimizing with the Power Utility

Description

Lambda Optimal

Usage

lambda_optimal(
  r_FLo,
  alpha_FLo,
  sigma_FLo,
  gamma_FLo,
  K_FLo,
  b_FLo,
  a_FLo,
  X_0_FLo,
  T_FLo
)

Arguments

r_FLo	Risk neural rate (striclty less than alpha_FL ), yearly composed
alpha_FLo	Risky rate of return, yearly composed
sigma_FLo	Volatility of the risky asset, yearly composed
gamma_FLo	Paramater Gamma in the Power Utility function. Must be different than 0
K_FLo	The constant that is added to the payoff (equal to b_o most of the time)
b_FLo	The strike price of the call option (variable annuity)
a_FLo	The multiplicator factor of the call option (variable annuity)
X_0_FLo	Budget value, or initial value invested in the portfolio/V.A.
T_FLo	Maturity, yearly composed

Value

The optimal Lambda (Lagrange multiplicator) given a specific intial budget value (X_0_FLo)

Examples

lambda_optimal(r_FLo=0.02,alpha_FLo=0.04,sigma_FLo=0.2,gamma_FLo=2,K_FLo=1,b_FLo=1,a_FLo=1,X_0_FLo=1.2,T_FLo=10)

belangerjulie15/Optimisation.Power.Utility documentation built on May 13, 2020, 5:39 a.m.