Dynamic shortfall constraints for optimal portfolios
Journal Title: Surveys in Mathematics and its Applications - Year 2010, Vol 5, Issue 0
Abstract
We consider a portfolio problem when a Tail Conditional Expectation constraint is imposed. The financial market is composed of n risky assets driven by geometric Brownian motion and one risk-free asset. The Tail Conditional Expectation is calculated for short intervals of time and imposed as risk constraint dynamically. The method of Lagrange multipliers is combined with the Hamilton-Jacobi-Bellman equation to insert the constraint into the resolution framework. A numerical method is applied to obtain an approximate solution to the problem. We find that the imposition of the Tail Conditional Expectation constraint when risky assets evolve following a log-normal distribution, curbs investment in the risky assets and diverts the wealth to consumption.
Authors and Affiliations
Daniel Akume, Bernd Luderer, Ralf Wunderlich
Keywords
Related Articles
- EP ID EP108106
- DOI -
- Views 120
- Downloads 0
A Fuzzy Commitment Scheme with McEliece's Cipher
In this paper an attempt has been made to explain a fuzzy commitment scheme with McEliece scheme. The efficiency and security of this cryptosystem is comparatively better than any other cryptosystem. This scheme is one o...
Uniformly continuous functions on non-Hausdorff groupoids
The purpose of this paper is to study the notion of uniform continuity introduced in [M. Buneci, Haar systems and homomorphism on groupoids, Operator algebras and mathematical physics, 35-49, Theta, Bucharest, 2003]. For...
New result of existence of periodic solution for a Hopfield neural networks with neutral time-varying delays
In this paper, a Hopfield neural network with neutral time-varying delays is investigated by using the continuation theorem of Mawhin's coincidence degree theory and some analysis technique. Without assuming the continuo...
Fonctions et intégrales elliptiques