Portfolio Optimization Under Local-Stochastic Volatility: Coefficient Taylor Series Approximations & Implied Sharpe Ratio
نویسندگان
چکیده
منابع مشابه
Portfolio Optimization under Local-Stochastic Volatility: Coefficient Taylor Series Approximations and Implied Sharpe Ratio
We study the finite horizonMerton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal investment strategy. We also analyze the ‘implied Sharpe ratio’ and derive a series approximation for this quantity. The zeroth-order approximation of the value fu...
متن کاملPortfolio Optimization under Local-Stochastic Volatility: Coefficient Taylor Series Approximations & Implied Sharpe Ratio
We study the finite horizonMerton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal investment strategy. We also analyze the ‘implied Sharpe ratio’ and derive a series approximation for this quantity. The zeroth-order approximation of the value fu...
متن کاملImplied and Local Volatilities under Stochastic Volatility
For asset prices that follow stochastic-volatility diffusions, we use asymptotic methods to investigate the behavior of the local volatilities and Black–Scholes volatilities implied by option prices, and to relate this behavior to the parameters of the stochastic volatility process. We also give applications, including risk-premium-based explanations of the biases in some näıve pricing and hedg...
متن کاملPortfolio Benchmarking under Drawdown Constraint and Stochastic Sharpe Ratio
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum wealth achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local stochastic volatility (LSV). The newly proposed investment objective paradigm also allows the investor to set portfolio benchmark targets. In the absence of closed-...
متن کاملPortfolio Optimization & Stochastic Volatility Asymptotics
We study the Merton portfolio optimization problem in the presence of stochastic volatility using asymptotic approximations when the volatility process is characterized by its time scales of fluctuation. This approach is tractable because it treats the incomplete markets problem as a perturbation around the complete market constant volatility problem for the value function, which is well-unders...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2015
ISSN: 1556-5068
DOI: 10.2139/ssrn.2620906