Electronic Resource
350 Main Street , Malden , MA 02148 , USA , and 9600 Garsington Road , Oxford OX4 2DQ , UK .
:
Blackwell Publishers, Inc.
Mathematical finance
13 (2003), S. 0
ISSN:
1467-9965
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Mathematics
,
Economics
Notes:
This paper considers a portfolio problem with control on downside losses. Incorporating the worst-case portfolio outcome in the objective function, the optimal policy is equivalent to the hedging portfolio of a European option on a dynamic mutual fund that can be replicated by market primary assets. Applying the Black-Scholes formula, a closed-form solution is obtained when the utility function is HARA and asset prices follow a multivariate geometric Brownian motion. The analysis provides a useful method of converting an investment problem to an option pricing model.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/1467-9965.t01-1-00177
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