Dynamic portfolio optimization with risk management and strategy constraints

Csilla Krommerová; Igor Melicherčík

Kybernetika (2014)

  • Volume: 50, Issue: 6, page 1032-1048
  • ISSN: 0023-5954

Abstract

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We investigate the problem of power utility maximization considering risk management and strategy constraints. The aim of this paper is to obtain admissible dynamic portfolio strategies. In case the floor is guaranteed with probability one, we provide two admissible solutions, the option based portfolio insurance in the constrained model, and the alternative method and show that none of the solutions dominate the other. In case the floor is guaranteed partially, we provide one admissible solution, the portfolio insurance with spreads.

How to cite

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Krommerová, Csilla, and Melicherčík, Igor. "Dynamic portfolio optimization with risk management and strategy constraints." Kybernetika 50.6 (2014): 1032-1048. <http://eudml.org/doc/262132>.

@article{Krommerová2014,
abstract = {We investigate the problem of power utility maximization considering risk management and strategy constraints. The aim of this paper is to obtain admissible dynamic portfolio strategies. In case the floor is guaranteed with probability one, we provide two admissible solutions, the option based portfolio insurance in the constrained model, and the alternative method and show that none of the solutions dominate the other. In case the floor is guaranteed partially, we provide one admissible solution, the portfolio insurance with spreads.},
author = {Krommerová, Csilla, Melicherčík, Igor},
journal = {Kybernetika},
keywords = {power utility maximization; risk management; convex constraints; power utility maximization; risk management; convex constraints},
language = {eng},
number = {6},
pages = {1032-1048},
publisher = {Institute of Information Theory and Automation AS CR},
title = {Dynamic portfolio optimization with risk management and strategy constraints},
url = {http://eudml.org/doc/262132},
volume = {50},
year = {2014},
}

TY - JOUR
AU - Krommerová, Csilla
AU - Melicherčík, Igor
TI - Dynamic portfolio optimization with risk management and strategy constraints
JO - Kybernetika
PY - 2014
PB - Institute of Information Theory and Automation AS CR
VL - 50
IS - 6
SP - 1032
EP - 1048
AB - We investigate the problem of power utility maximization considering risk management and strategy constraints. The aim of this paper is to obtain admissible dynamic portfolio strategies. In case the floor is guaranteed with probability one, we provide two admissible solutions, the option based portfolio insurance in the constrained model, and the alternative method and show that none of the solutions dominate the other. In case the floor is guaranteed partially, we provide one admissible solution, the portfolio insurance with spreads.
LA - eng
KW - power utility maximization; risk management; convex constraints; power utility maximization; risk management; convex constraints
UR - http://eudml.org/doc/262132
ER -

References

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  10. Nutz, M., 10.1111/j.1467-9965.2011.00480.x, Math. Finance 22 (2012), 4, 690-709. Zbl1272.91102MR2968281DOI10.1111/j.1467-9965.2011.00480.x
  11. Nutz, M., 10.1214/11-AAP776, Ann. Appl. Probab. 22 (2012), 1, 363-406. Zbl1239.91165MR2932550DOI10.1214/11-AAP776
  12. Perold, A., Sharpe, W. F., 10.2469/faj.v44.n1.16, Financ. Anal. J. 44 (1988), 1, 16-27. DOI10.2469/faj.v44.n1.16
  13. Prigent, J.-L., Portfolio Optimization and Performance Analysis., Chapman and Hall/CRC Financial Mathematics Series, Boca Raton 2007. Zbl1188.91003MR2317120
  14. Samuelson, P. A., 10.2307/1926559, Rev. Econom. Statist. 51 (1969), 3, 239-246. DOI10.2307/1926559

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