Abstract
The tremendous growth in derivative markets around the world and the high quality of information about these instruments that is widely available, offers us a new opportunity harness their unique return distribution characteristics for building portfolios that conform more closely to investor preferences than is possible with mean-variance analysis and portfolio insurance techniques for downside protection. This study shows how portfolio optimization with Power-Log utility functions can be used to optimize portfolios containing derivatives, to produce portfolios with high growth potential and built-in downside protection. It also compares this method of portfolio construction with portfolio insurance, which has been used for providing downside protection to portfolios.
| Original language | American English |
|---|---|
| Journal | International Journal of Computer Applications in Technology |
| State | Published - Jan 1 2009 |
Disciplines
- Business
- Economics
- Finance and Financial Management