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Portfolio optimization for pension plans under hybrid stochastic and local volatility

Sung-Jin Yang, Jeong-Hoon Kim, Min-Ku Lee (2015)

Applications of Mathematics

Based upon an observation that it is too restrictive to assume a definite correlation of the underlying asset price and its volatility, we use a hybrid model of the constant elasticity of variance and stochastic volatility to study a portfolio optimization problem for pension plans. By using asymptotic analysis, we derive a correction to the optimal strategy for the constant elasticity of variance model and subsequently the fine structure of the corrected optimal strategy is revealed. The result...

Producing the tangency portfolio as a corner portfolio

Reza Keykhaei, Mohamad-Taghi Jahandideh (2013)

RAIRO - Operations Research - Recherche Opérationnelle

One-fund theorem states that an efficient portfolio in a Mean-Variance (M-V) portfolio selection problem for a set of some risky assets and a riskless asset can be represented by a combination of a unique risky fund (tangency portfolio) and the riskless asset. In this paper, we introduce a method for which the tangency portfolio can be produced as a corner portfolio. So, the tangency portfolio can be computed easily and fast by any algorithm designed for tracing out the M-V efficient frontier via...

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