Portfolio performance under tracking error and benchmark volatility constraints

Super-replication in Stochastic Volatility Models under Portfolio Constraints

We study a financial market with incompleteness arising from two sources: stochastic volatility and portfolio constraints. The latter are given in terms of bounds imposed on the borrowing and short-selling of a ‘hedger’ in this market, and can be described by a closed convex set K . We find explicit characterizations of the minimal price needed to super-replicate European-type contingent claims...

Direct characterization of the value of super-replication under stochastic volatility and portfolio constraints

We study the problem of minimal initial capital needed in order to hedge a European contingent claim without risk. The nancial market presents incompleteness arising from two sources: stochastic volatility and portfolio constraints described by a closed convex set. In contrast with previous literature which uses the dual formulation of the problem, we use an original dynamic programming princip...

Tracking error: a multistage portfolio model

We study multistage tracking error problems. Different tracking error measures, commonly used in static models, are discussed as well as some problems which arise when we move from static to dynamic models. We are interested in dynamically replicating a benchmark using only a small subset of assets, considering transaction costs due to rebalancing and introducing a liquidity component in the po...

Portfolio delegation under short - selling constraints ∗

In this paper we study delegated portfolio management when the manager’s ability to short-sell is restricted. Contrary to previous results, we show that under moral hazard, linear performance-adjusted contracts do provide portfolio managers with incentives to gather information. The risk-averse manager’s optimal effort is an increasing function of her share in the portfolio’s return. This resul...

On utility maximization under convex portfolio constraints