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Author : Abraham Lioui
Release : 1998
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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
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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 : Marcos Escobar
Release : 2014
Genre :
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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 : Holger Kraft
Release : 2012-08-27
Genre : Business & Economics
Kind : eBook
Book Rating : 412/5 ( 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 2012-08-27. Available in PDF, EPUB and Kindle. Book excerpt: This thesis summarizes most of my recent research in the field of portfolio optimization. The main topics which I have addressed are portfolio problems with stochastic interest rates and portfolio problems with defaultable assets. The starting point for my research was the paper "A stochastic control ap proach to portfolio problems with stochastic interest rates" (jointly with Ralf Korn), in which we solved portfolio problems given a Vasicek term structure of the short rate. Having considered the Vasicek model, it was obvious that I should analyze portfolio problems where the interest rate dynamics are gov erned by other common short rate models. The relevant results are presented in Chapter 2. The second main issue concerns portfolio problems with default able assets modeled in a firm value framework. Since the assets of a firm then correspond to contingent claims on firm value, I searched for a way to easily deal with such claims in portfolio problems. For this reason, I developed the elasticity approach to portfolio optimization which is presented in Chapter 3. However, this way of tackling portfolio problems is not restricted to portfolio problems with default able assets only, but it provides a general framework allowing for a compact formulation of portfolio problems even if interest rates are stochastic.
Author : George Yin
Release : 2019-07-16
Genre : Mathematics
Kind : eBook
Book Rating : 984/5 ( reviews)
Book Synopsis Modeling, Stochastic Control, Optimization, and Applications by : George Yin
Download or read book Modeling, Stochastic Control, Optimization, and Applications written by George Yin. This book was released on 2019-07-16. Available in PDF, EPUB and Kindle. Book excerpt: This volume collects papers, based on invited talks given at the IMA workshop in Modeling, Stochastic Control, Optimization, and Related Applications, held at the Institute for Mathematics and Its Applications, University of Minnesota, during May and June, 2018. There were four week-long workshops during the conference. They are (1) stochastic control, computation methods, and applications, (2) queueing theory and networked systems, (3) ecological and biological applications, and (4) finance and economics applications. For broader impacts, researchers from different fields covering both theoretically oriented and application intensive areas were invited to participate in the conference. It brought together researchers from multi-disciplinary communities in applied mathematics, applied probability, engineering, biology, ecology, and networked science, to review, and substantially update most recent progress. As an archive, this volume presents some of the highlights of the workshops, and collect papers covering a broad range of topics.
