[PDF] Top 20 Mean-variance hedging and optimal investment in Heston's model with correlation

... asset S if the hedger wishes to minimize the expected squared hedging ...the optimal hedge is to derive the density process of the so-called variance-optimal martingale measure (VOMM) ... See full document

... single-period mean-risk model is routinely used in the investment industry because it allows for practical trading constraints, frictional costs and similar realistic ...and model ... See full document

... reinsurer’s optimal investment strategy and the proportion he accepted for reinsurance under proportional reinsurance and exponential utility preference in the cases where the Brownian motions were ... See full document

... If S fails to be a martingale, the hedging problem becomes much more ...deterministic mean-variance tradeoff, which can be intepreted as a certain homogeneity property of the asset price ... See full document

... the optimal portfolio derived from mean-CVaR than that from mean-variance model and mean-CVaR model does a better job in controlling the tail-risk but ignoring the ... See full document

... (BL) model appeared in the literature as Black and Litterman [1991, 1992], it has received considerable interest from the investment management ...active investment views should also lead to revi- ... See full document

... efficient investment strategy for C ≥ C ∗ , where C ∗ is the expected terminal surplus corresponding to the global minimum variance of the terminal surplus over all feasible ...efficient investment ... See full document

... the mean-variance method the investor could try to use the results from stochastic finance, where the solution of the utility maximization problem is well understood even in a general semimartingale ... See full document

... i.e. mean and ...of variance and standard ...result, mean-variance optimisation, while theoretically sound, may not account fully for the empirically-observed behaviour of return ...accurate ... See full document

... Among the variety of financial derivatives, the option is one of the most important financial instruments. An option is define as the right, but not the obligation, to buy (call option) or sell (put option) a specific ... See full document

... The empirical implementation of CAPM however was fraught with difficulties from an early stage. The careful work of Black, Jensen and Scholes (1972) demonstrates that assets with low β earn a higher return on average ... See full document

... Modelling derivative products in Finance usually starts with the specification of a system of Stochastic Differential Equations (SDEs), that correspond to state variables like stock, interest rate and volatility. By ... See full document

... not hedging against the strengthening of the ...crisis. Hedging downside risk would have helped banks and firms in these episodes stay financially ...a model of optimal hedging and ... See full document

... the correlation of the proxy return with the true market return is at least ...90% correlation between the proxy and the market ...maximum correlation between the proxy and market return conducted ... See full document

... In this paper, we had considered Bi-objective Mean- Variance model for portfolio selection. Two fuzzy non-linear programming techniques based on FNLP and FAGP are used to solve the model. Also ... See full document

... We will make the assumption that the assets returns are following a multi- variate GARCH model, or to be more specic, a standard DCC model. Our nancial time-series is the S & P 500 index and an ... See full document

... Henderson, 2002, Valuation of claims on nontraded assets using utility maximization;.. Musiela, Zariphopoulou, 2004, An example of indifference prices under exponential preferences;![r] ... See full document

... and s and has applications in the theory of probability. However, variance is also a crucial quantity in probability and statistics ...the variance of a continuous function f with respect to a weight ... See full document

... about model accuracy, it is essential to begin with the Merton (1974) model, which is used to calculate default ...(1974) model has a tendency to systematically produce spreads that are too low (see, ... See full document

... Both variance and gamma swaps provide exposure to ...that variance swaps offer a constant cash Gamma, whereas Gamma Swaps provide a constant share Gamma, and hence does not require a dynamic ...for ... See full document