International Portfolio Management for Long Term Investors: Models and Illustrations

• Main Author: 宣葳
• Other Authors: Tsai, Chenghsien
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/19722914983026211555

碩士 === 國立政治大學 === 風險管理與保險研究所 === 93 === In this study, we investigate the hedge demands in international portfolio management under a general continuous time framework for constant relative risk averse investors where, in particular, exchange rate risk and the interest rate risk are incorporated. Within this international economy, the changes of real exchange rates, real interest rates and stock prices are assumed to follow the Markovian processes whose drifts and diffusion parameters are driven by certain state variables. Our approach is through the use of the martingale methodology developed by Cox and Huang (1989, 1991) as proposed in the work of Lioui and Poncet (2003). Following their framework, we consider the economy of the investors that consists of one foreign currency and the domestic one, together with their bond portfolios and stock indices. Adding to the previous works, we have compared the obtained optimal strategies with some prevailing ad hoc ones in order to clarify the hedge effects in financial decision from the long term perspective.