We present a model in which a sovereign country optimally decides on its consumption and investment policies as well as on the optimal time to default. In the paper we allow the sovereign borrower to keep the fraction of its augmented wealth in so-called international reserves. We further assume...

Value at Risk (VaR) has emerged in recent years as a standard tool to measure and control the risk of trading portfolios.Yet,existing theoretical analyses of the optimal behavior of a trader subject to VaR limits have produced a negative view of VaR as a risk-control tool. In particular,VaR...

In this paper we study the optimal portfolio management for the constant relative-risk averse investor who maximizes an expected utility of his terminal wealth and who faces transaction costs during his trades. In our model the investor's portfolio consists of one risky and one risk-free asset,...

We present a geometric approach to discrete time multiperiod mean variance portfolio optimization that largely simplifies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decomposed in an orthogonal...

Constraints on downside risk, measured by shortfall probability, expected shortfall, semi-variance etc., lead to optimal asset allocations which differ from the meanvariance optimum. The resulting optimization problem can become quite complex as it exhibits multiple local extrema and...

To obtain the maximum benefits from diversification, financial theory suggests that investors should invest internationally because of the larger potential for risk reduction stemming from the lower correlation exisiting between assets of different countries. The question that we raise in this...

In this paper, we solve the intertemporal investment problem of an investor holding a portfolio of default-free and defaultable bonds. Default-risk is modeled in an intensity based framework with state variables following an affine diffusion. The structure of the optimal portfolio over time is...

This paper addresses whether country allocation provides benefits over industry allocation in a sample of European country and industry indexes. Strategy performance is compared using a mean-variance spanning test. We find that, for investors with low risk aversion, industry allocation is as...

We use constrained cross-section regressions to disentangle the effects of various factors on international real estate security returns. Besides a common factor, pure country, property type, size, and value/growth factors are considered. The value/growth measure that is used in this paper...

The Omega performance measure is equiped with the original family of Johnson distributions. Explicit representations for Omega or Sharpe with all four Johnson cumulated densities were derived to construct portfolios with respect to 4 mutually independent moments. Additionally, decompositions of...