The presence of options in a portfolio fundamentally alters the portfolio's risk and return profiles when compared to an all equity portfolio. In this paper, we advocate modeling a risk-based criterion for optioned portfolio selection and rebalancing problems. The criterion is inspired by...

We prove that the total risk of a portfolio held by an investor with preferences described by a power utility with subsistence or a HARA utility, is a weighted sum of the covariances between the portfolio's return and higher-order powers of that return, shifted by the subsistence level. We show...

We formulate the open-loop control framework for time-consistent mean-variance (TCMV) portfolio problems in incomplete markets with stochastic volatility (SV). We offer the existence and uniqueness results of the TCMV equilibrium controls for general SV models and derive explicit closed-form...

In this paper, first we study a stochastic volatility market model for which an explicit candidate solution to the problem of maximizing utility function of terminal wealth is obtained. Applying this result, we present a complete solution for the Heston model which is a particular case of the...

Using high-frequency data, we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents between 2003 and 2011 generally exceed the corresponding continuous betas. We...

We introduce a new framework for understanding portfolio diversification that provides a coherent basis for comparing methodologies and offers a new approach to portfolio construction. The primary argument is that measures of diversification based only on a covariance matrix are ambiguous...

In this paper, we derive optimal investment policies at the industry portfolio level under the stochastic investment opportunities of dynamic and asymmetric properties. For this purpose, we present a new model of intertemporal dynamic portfolio choice as well as non-myopic optimal consumption...

Fractional Kelly portfolios are popular investment strategies in the market. In this paper, we improve the mean-variance efficiency of a fractional Kelly portfolio by minimizing the variance of the return of a portfolio subject to the constraint that the expected return rate of the portfolio is...