Diversified Portfolios with Jumps in a Benchmark Framework |
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| Authors: | Email author" target="_blank">Eckhard?PlatenEmail author |
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| Institution: | (1) Department of Mathematical Sciences, School of Finance and Economics, University of Technology Sydney, Broadway, NSW 2007, Australia |
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| Abstract: | This paper considers diversified portfolios in a sequence of jump diffusion market models. Conditions for the approximation
of the growth optimal portfolio (GOP) by diversified portfolios are provided. Under realistic assumptions, it is shown that
diversified portfolios approximate the GOP without requiring any major model specifications. This provides a basis for systematic
use of diversified stock indices as proxies for the GOP in derivative pricing, risk management and portfolio optimization.
1991 Mathematics Subject Classification: primary 90A12; secondary 60G30; 62P20
JEL Classification: G10, G13 |
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| Keywords: | benchmark model diversified portfolio growth optimal portfolio |
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