This paper provides a new method for constructing a dynamic optimal portfolio for asset management. This method generates a target payoff distribution using the cheapest dynamic trading strategy. As a practical example, the method is applied to hedge fund replication. This dynamic portfolio...

This paper studies the probability distribution and option pricing for drawdown in a stochastic volatility environment. Their analytical approximation formulas are derived by the application of a singular perturbation method (Fouque et al., 2000). The mathematical validity of the approximation...