Optimal portfolios in commodity futures markets |
| |
Authors: | Fred Espen Benth Jukka Lempa |
| |
Affiliation: | 1. Centre of Mathematics for Applications, University of Oslo, PO Box 1053, Blindern, 0316, Oslo, Norway 2. School of Business, Faculty of Social Sciences, Oslo and Akershus University College, P.O. Box 4, St. Olavs Plass, 0130, Oslo, Norway
|
| |
Abstract: | We develop a general approach to portfolio optimization in futures markets. Following the Heath–Jarrow–Morton (HJM) approach, we model the entire futures price curve at once as a solution of a stochastic partial differential equation. We also develop a general formalism to handle portfolios of futures contracts. In the portfolio optimization problem, the agent invests in futures contracts and a risk-free asset, and her objective is to maximize the utility from final wealth. In order to capture self-consistent futures price dynamics, we study a class of futures price curve models which admit a finite-dimensional realization. More precisely, we establish conditions under which the futures price dynamics can be realized in finite dimensions. Using the finite-dimensional realization, we derive a finite-dimensional form of the portfolio optimization problem and study its solution. We also give an economic interpretation of the coordinate process driving the finite-dimensional realization. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|