Optimal portfolios with bounded shortfall risks

• Main Authors: Gabih, Abdelali, Wunderlich, Ralf
• Other Authors: TU Chemnitz, Fakultät für Mathematik
• Format: Others
• Language: English
• Published: Universitätsbibliothek Chemnitz 2004
• Subjects: Black-Scholes model; dynamic strategy; martingale method; optimal portfolio; shortfall risk; ddc:510
• Online Access: http://nbn-resolving.de/urn:nbn:de:swb:ch1-200401202; http://nbn-resolving.de/urn:nbn:de:swb:ch1-200401202; http://www.qucosa.de/fileadmin/data/qucosa/documents/4868/data/ga_wu_tagungsband_2003.pdf; http://www.qucosa.de/fileadmin/data/qucosa/documents/4868/20040120.txt

This paper considers dynamic optimal portfolio strategies of utility maximizing investors in the presence of risk constraints. In particular, we investigate the optimization problem with an additional constraint modeling bounded shortfall risk measured by Value at Risk or Expected Loss. Using the Black-Scholes model of a complete financial market and applying martingale methods we give analytic expressions for the optimal terminal wealth and the optimal portfolio strategies and present some numerical results.