Continuous-time mean-variance portfolio optimization in a jump-diffusion market |
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Authors: | ?zge?Sezgin?Alp Email author" target="_blank">Ralf?KornEmail author |
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Institution: | 1.Institute of Applied Mathematics, Department of Financial Mathematics,Middle East Technical University,Ankara,Turkey;2.Faculty of Commercial Sciences, Department of Accounting and Financial Management,Baskent University,Ankara,Turkey;3.Fachbereich Mathematik,University Kaiserslautern and Fraunhofer ITWM,Kaiserslautern,Germany |
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Abstract: | In this paper, we take up an approach of (Lindberg, in Bernoulli, 15(2):464–474, 2009) who introduced a new parameterization
of the Black–Scholes model that allows for an easy solution of the continuous-time Markowitz mean-variance problem. We generalize
the results of (Lindberg, in Bernoulli, 15(2):464–474, 2009) to a jump-diffusion market setting and slightly correct the proof
and the assertion of the main result. Further, we demonstrate the implications of the Lindberg parameterization for the stock
price drift vector in different market settings, analyse the dependence of the optimal portfolio from jump and diffusion risk
and finally indicate how to use the method. We particularly also show how the optimal strategy can be obtained with the restricted
use of historical data. |
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Keywords: | |
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