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We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model …
Persistent link: https://www.econbiz.de/10008797745
We solve the problem of mean-variance hedging for general semimartingale models via stochastic control methods. After proving that the value process of the associated stochastic control problem has a quadratic structure, we characterise its three coefficient processes as solutions of...
Persistent link: https://www.econbiz.de/10009558490
We solve the problems of mean-variance hedging (MVH) and mean-variance portfolio selection (MVPS) under restricted information. We work in a setting where the underlying price process S is a semimartingale, but not adapted to the filtration G which models the information available for...
Persistent link: https://www.econbiz.de/10011865489
QP application. The advantage of Monte Carlo methods is that they may be extended to risk functions that are more … classical Gaussian limitations. The optimization of quadratic risk-return functions, VaR, CVaR, may be handled in a similar … risk preferences are optimized with differing multivariate distributions. Good comparisons with established results in Mean …
Persistent link: https://www.econbiz.de/10013137970
This paper examines the effectiveness of using futures contracts as hedging instruments of: (1) alternative models of volatility for estimating conditional variances and covariances; (2) alternative currencies; and (3) alternative maturities of futures contracts. For this purpose, daily data of...
Persistent link: https://www.econbiz.de/10013113663
This article introduces a new approach to the tracking portfolio composition. Unlike traditional approaches, it doesn't require benchmark composition to be known and works on any sets of assets. Models presented in the article allow deriving a portfolio composition that results in the optimal...
Persistent link: https://www.econbiz.de/10013123158
The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC and BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and...
Persistent link: https://www.econbiz.de/10013149486
Following Levy and Roll [2010], we posit that the market portfolio is the efficient tangent Markowitz portfolio, i.e., it is mean-variance efficient. We then reverse engineer the expected returns and variance terms with constraints imposed by empirical data on a hierarchy of asset baskets. This...
Persistent link: https://www.econbiz.de/10009009611
components used in asset pricing, namely the risk physical and neutral measures and the relative pricing kernel.The analysis is … utility of terminal wealth, we prove the existence of an information premium between what is required by the theory, a … interconnection between the pricing kernel and its densities, the extension to the risk-neutral measure follows naturally …
Persistent link: https://www.econbiz.de/10011506342
Persistent link: https://www.econbiz.de/10003961709