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Author : Abraham Lioui
Release : 1998
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis More on Optimal Portfolio Choice Under Stochastic Interest Rates by : Abraham Lioui
Download or read book More on Optimal Portfolio Choice Under Stochastic Interest Rates written by Abraham Lioui. This book was released on 1998. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Abraham Lioui
Release : 2010
Genre :
Kind : eBook
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Book Synopsis On Optimal Portfolio Choice Under Stochastic Interest Rates by : Abraham Lioui
Download or read book On Optimal Portfolio Choice Under Stochastic Interest Rates written by Abraham Lioui. This book was released on 2010. Available in PDF, EPUB and Kindle. Book excerpt: In an economy where interest rates and stock price changes follow fairly general stochastic processes, we analyse the portfolio problem of an expected utility investor. When the investment opportunity set is driven by an arbitrary number of state variables, the optimal portfolio strategy is known to contain a speculative element and Merton-Breeden hedging terms against the fluctuations of each and every state variable. While the first component is well identified and easy to work out, the implementation of the last ones is problematic as the investor must identify all the relevant state variables and estimate their distribution characteristics. Using a new decomposition of the optimal wealth, we show that the optimal strategy can be simplified to include, in addition to the speculative component, only two Merton-Breeden type hedging elements, however large is the number of state variables. The first one is associated with interest rate risk and the second one with the risk brought about by the co-movements of the spot interest rate and the market prices of risk. The implementation of the optimal strategy is thus much easier, as it involves estimating the characteristics of the yield curve and the market prices of risk only rather than those of numerous (a priori unknown) state variables. Moreover, the investor's horizon is shown explicitly to play a crucial role in the optimal strategy design, in sharp contrast with the traditional decomposition.
Author : Holger Kraft
Release : 2004-04-13
Genre : Business & Economics
Kind : eBook
Book Rating : 300/5 ( reviews)
Book Synopsis Optimal Portfolios with Stochastic Interest Rates and Defaultable Assets by : Holger Kraft
Download or read book Optimal Portfolios with Stochastic Interest Rates and Defaultable Assets written by Holger Kraft. This book was released on 2004-04-13. Available in PDF, EPUB and Kindle. Book excerpt: The continuous-time portfolio problem consists of finding the optimal investment strategy of an investor. In the classical Merton problem the investor can allocate his funds to a riskless savings account and risky assets. However, to get explicit results, it is assumed that the interest rates are deterministic and that the assets are default free. In this monograph both assumptions are weakened: The author analyzes and solves portfolio problems with stochastic interest rates and with defaultable assets. Besides, he briefly discusses how portfolio problems with foreign assets can be handled. The focus of the monograph is twofold: On the one hand, the economical problems are carefully explained, on the other hand their formal solution is rigorously presented. For this reason the text should be of interest to researchers with a Finance background as well as to researchers with a more formal background who would like to see how mathematics is applied to portfolio theory. TOC:Preliminaries from Stochastics.- Optimal Portfolios with Stochastic Interest Rates.- Elasticity Approach to Portfolio Optimization.- Barrier Derivatives with Curved Boundaries.- Optimal Portfolios with Dafaultable Assets - A Firm Value Approach.- References.- Abbreviations.- Notations.
Author : Marcos Escobar
Release : 2014
Genre :
Kind : eBook
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Book Synopsis Portfolio Choice with Stochastic Interest Rates and Learning About Stock Return Predictability by : Marcos Escobar
Download or read book Portfolio Choice with Stochastic Interest Rates and Learning About Stock Return Predictability written by Marcos Escobar. This book was released on 2014. Available in PDF, EPUB and Kindle. Book excerpt: The problem of optimal wealth allocation is solved under the assumptions that interest rates are stochastic and stock returns are predictable with observed and unobserved factors. The stock risk premium is taken to be an affine function of the predictive variables and the stock return volatility is assumed to depend on the observed factor. The latent factor is estimated based on the observations. It is shown that the stock return predictability can significantly impact the optimal bond portfolio. The welfare loss from ignoring learning can be considerable.
Author : Mads Kvist Pedersen
Release : 2001
Genre :
Kind : eBook
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Book Synopsis Optimal Portfolio Policies for an Investor with Uncertain Time of Death in a Stochastic Interest Rate Economy by : Mads Kvist Pedersen
Download or read book Optimal Portfolio Policies for an Investor with Uncertain Time of Death in a Stochastic Interest Rate Economy written by Mads Kvist Pedersen. This book was released on 2001. Available in PDF, EPUB and Kindle. Book excerpt:
