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We analyze the optimal portfolio choice in a multi-asset Wishart-model in which return variances and correlations are stochastic and subject to jump risk. The optimal portfolio is characterized by the positions in stock diffusion risk, variance-covariance diffusion risk, and jump risk. We find...
Persistent link: https://www.econbiz.de/10012972045
We study the optimal portfolio choice of international investors when variances and correlations are stochastic. We assume that the returns from the perspective of the domestic investor are driven by a Wishart Affine Stochastic Correlation (WASC) model. We show that this also holds from the...
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This paper examines whether and how the popularity of portfolio insurance strategies can be justified theoretically. The analysis employs three different return generating processes with and without stochastic volatility and jumps. We find that an investor with constant relative risk aversion...
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Stocks are exposed to the risk of sudden downward jumps. Additionally, a crash in one stock (or index) can increase the risk of crashes in other stocks (or indices). Our paper explicitly takes this contagion risk into account and studies its impact on the portfolio decision of a CRRA investor...
Persistent link: https://www.econbiz.de/10009764762
We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces...
Persistent link: https://www.econbiz.de/10010225880