We consider a finite horizon discrete time model for bond market where bond prices are functions of the short rate process. We use a variant of the Ito's formula to decompose the bond price process into unique drift and martingale processes. We then apply the Girsanov's Theorem for finding a...

This article concerns the problem of optimal portfolio selection. The objective of this paper is to indicate the best method and criteria for optimal portfolio selection. In order to achieve the objective six models including such optimization criteria as mean, variance, skewness, kurtosis and...

Usually in financial textbooks and courses the theory of portfolio selection is taught in a strictly theoretical way. There is a model (Markowitz) that stipulates that an investor has preferences and that she will choose the best portfolio, given her preference curves and an efficient frontier....

We study portfolio selection under Conditional Value-at-Risk and, as its natural extension, spectral risk measures, and compare it with traditional mean–variance analysis. Unlike the previous literature that considers an investor’s mean-spectral risk preferences for the choice of optimal...

This paper presents several new concepts for portfolio problems with independently distributed asset prices. A criterion is developed for including or excluding assets in an optimal portfolio for an investor maximizing the expected value of a von Neumann--Morgenstern utility function. The...

This paper considers a multi-period mean–variance portfolio selection problem with uncertain time-horizon in a regime-switching market, where the conditional distribution of the time-horizon is assumed to be stochastic and depends on the market states as the returns of risky assets do....

We investigate in this paper a continuous-time mean–variance portfolio selection problem in a general market setting with multiple assets that all can be risky. Using the Lagrange duality method and the dynamic programming approach, we derive explicit closed-form expressions for the efficient...

Selecting program portfolios within a budget constraint is an important challenge in the management of new product development (NPD). Optimal portfolios are difficult to define because of the combinatorial complexity of project combinations. However, at the aggregate level of the strategic...

In an exchange economy under uncertainty populated by consumers having constant and equal relative risk aversion but heterogeneous probabilistic beliefs, we analyze the nature of the representative consumer's probabilistic belief and discount rates. We prove a formula that implies that the...

The aim of this work is to use a duality approach to study the pricing of derivatives depending on two stocks driven by a bidimensional Lévy process. The main idea is to apply Girsanov's Theorem for Lévy processes, in order to reduce the posed problem to the pricing of a one Lévy driven stock...