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Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...
Persistent link: https://www.econbiz.de/10011308467
We explore a multi-asset jump-diffusion pricing model, combining a systemic risk asset with several conditionally independent ordinary assets. Our approach allows for analyzing and modeling a portfolio that integrates high-activity security, such as an exchange trading fund (ETF) tracking a...
Persistent link: https://www.econbiz.de/10014446758
Persistent link: https://www.econbiz.de/10003221993
We derive allocation rules under isoelastic utility for a mixed jump-diffusion process in a two-asset portfolio selection problem with finite horizon in the presence of proportional transaction costs. We adopt a discrete time formulation, let the number of periods go to infinity, and show that...
Persistent link: https://www.econbiz.de/10012965785
Contrary to well-known asset pricing models, volatilities implied by equity index options exceed realized stock market volatility and exhibit a pattern known as the volatility skew. We explain both facts using a model that can also account for the mean and volatility of equity returns. Our model...
Persistent link: https://www.econbiz.de/10012856361
While the proportional hazard model is recognized to be statistically meaningful for analyzing and estimating financial event risks, the existing literature that analytically deals with the valuation problems is very limited. In this paper, adopting the proportional hazard model in continuous...
Persistent link: https://www.econbiz.de/10013094076
We consider the frequency and correlation of extreme return observations or “jumps” across equities, Treasury bonds, corporate bonds, currencies, commodities, and real estate. Understanding more about jumps is important to investors as diversification across asset classes is diminished if...
Persistent link: https://www.econbiz.de/10012933005
We propose a consistent and computationally efficient 2-step methodology for the estimation of multidimensional non-Gaussian asset models built using Lévy processes. The proposed framework allows for dependence between assets and different tail-behaviors and jump structures for each asset. Our...
Persistent link: https://www.econbiz.de/10012937321
This study develops and implements a theory and method for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a test procedure for ‘stochastic spanning’ for two nested polyhedral...
Persistent link: https://www.econbiz.de/10010512497
We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and...
Persistent link: https://www.econbiz.de/10012219063