Duality in mean-variance frontiers with conditioning information

Dotted Representations of Mean-Variance Efficient Frontiers and their Computation

This paper is about dotted representations of efficient frontiers. Dotted representations, as in portfolio selection, can often be the most practical way of communicating an efficient frontier. The most popular method is to minimize variance subject to fixed levels of expected ∗Corresponding author [email protected]

Uncertainty Shocks, Mean-Variance Frontiers, and Business Cycles∗

This paper constructs a model economy to explain how uncertainty shocks can cause business cycle fluctuations. In the model, during times of high uncertainty, the representative agent, due to risk aversion motives, moves resources from a high risk/high return production process to a low risk/low return production process. High uncertainty thus causes the firm level technology frontier to endoge...

Convex Duality in Constrained Mean-variance Portfolio Optimization

Convex duality in mean-variance hedging under convex trading constraints

We study mean-variance hedging under portfolio constraints in a general semimartingale model. The constraints are formulated via predictable correspondences, meaning that the trading strategy is restricted to lie in a closed convex set which may depend on the state and time in a predictable way. To obtain the existence of a solution, we first establish the closedness in L2 of the space of all g...

Uncertainty Shocks in a Model with Mean-Variance Frontiers and Endogenous Technology Choices∗

This paper builds a model to show how increases in aggregate uncertainty an uncertainty shock can generate recessions. Uncertainty shocks in the model are able to both account for a significant portion of business cycle fluctuations observed in data and generate positive comovements between output, consumption, investment, and hours. The key assumption of the model is that firm managers endogen...