SSRN Author: Marius AschebergMarius Ascheberg SSRN Content
http://www.ssrn.com/author=1505890
http://www.ssrn.com/rss/en-usSun, 29 Nov 2015 02:20:15 GMTeditor@ssrn.com (Editor)Sun, 29 Nov 2015 02:20:15 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on quantities known only in the true model. We apply our method to a calibrated affine model. Our findings are threefold: Jumps matter more, i.e. our approximation is less accurate, if (i) the expected jump size or (ii) the jump intensity is large. Fixing the average impact of jumps, we find that (iii) rare, but severe jumps matter more than frequent, but small jumps.
http://www.ssrn.com/abstract=2259630
http://www.ssrn.com/1448360.htmlSat, 28 Nov 2015 13:07:49 GMTREVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on quantities known only in the true model. We apply our method to a calibrated affine model. Our findings are threefold: Jumps matter more, i.e. our approximation is less accurate, if (i) the expected jump size or (ii) the jump intensity is large. Fixing the average impact of jumps, we find that (iii) rare, but severe jumps matter more than frequent, but small jumps.
http://www.ssrn.com/abstract=2257689
http://www.ssrn.com/1448390.htmlSat, 28 Nov 2015 12:47:31 GMTREVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on quantities known only in the true model. We apply our method to a calibrated affine model. Our findings are threefold: Jumps matter more, i.e.\ our approximation is less accurate, if (i) the expected jump size or (ii) the jump intensity is large. Fixing the average impact of jumps, we find that (iii) rare, but severe jumps matter more than frequent, but small jumps.
http://www.ssrn.com/abstract=2259630
http://www.ssrn.com/1428707.htmlWed, 16 Sep 2015 16:10:39 GMTREVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on quantities known only in the true model. We apply our method to a calibrated affine model. Our findings are threefold: Jumps matter more, i.e. our approximation is less accurate, if (i) the expected jump size or (ii) the jump intensity is large. Fixing the average impact of jumps, we find that (iii) rare, but severe jumps matter more than frequent, but small jumps.
http://www.ssrn.com/abstract=2257689
http://www.ssrn.com/1428704.htmlWed, 16 Sep 2015 15:54:56 GMTREVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on results from the true model. We apply our method to a calibrated affine model and find that relative wealth equivalent losses are below 1.16% if the jump size is stochastic and below 1% if the jump size is constant and γ ≥ 5. We perform robustness checks for various levels of risk-aversion, expected jump size, and jump intensity.
http://www.ssrn.com/abstract=2259630
http://www.ssrn.com/1366091.htmlSun, 18 Jan 2015 07:38:49 GMTREVISION: When Do Jumps Matter for Portfolio Optimization?We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces the jumps by a diffusion and solve the resulting problem analytically. Furthermore, we provide explicit bounds on the true optimal strategy and the relative wealth equivalent loss that do not rely on results from the true model. We apply our method to a calibrated affine model and find that relative wealth equivalent losses are below 1.16% if the jump size is stochastic and below 1% if the jump size is constant and the risk aversion is above 5. We perform robustness checks for various levels of risk-aversion, expected jump size, and jump intensity.
http://www.ssrn.com/abstract=2257689
http://www.ssrn.com/1366059.htmlSun, 18 Jan 2015 07:37:18 GMT