Optimal portfolios with bounded capital at risk

Susanne Emmer, Claudia Klüppelberg, Ralf Korn

Research output: Contribution to journalArticlepeer-review

81 Scopus citations

Abstract

We consider some continuous-time Markowitz type portfolio problems that consist of maximizing expected terminal wealth under the constraint of an upper bound for the capital at risk. In a Black-Scholes setting we obtain closed-form explicit solutions and compare their form and implications to those of the classical continuous-time mean-variance problem. We also consider more general price processes that allow for larger fluctuations in the returns.

Original languageEnglish
Pages (from-to)365-384
Number of pages20
JournalMathematical Finance
Volume11
Issue number4
DOIs
StatePublished - Oct 2001

Keywords

  • Black-scholes model
  • Capital at risk
  • Generalized inverse Gaussian diffusion
  • Jump diffusion
  • Portfolio optimization
  • Value at risk

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