The corporate optimal portfolio and consumption choice problem in the real project with borrowing rate higher than deposit rate

2006 ◽  
Vol 175 (2) ◽  
pp. 1596-1608 ◽  
Author(s):  
Zhen Wu ◽  
Liyan Zhang
Keyword(s):  
Optimal Portfolio ◽  
Choice Problem ◽  
Deposit Rate ◽  
The Real

scholarly journals Beyond the Carry Trade: Optimal Currency Portfolios

2015 ◽  
Vol 50 (5) ◽  
pp. 1037-1056 ◽  
Author(s):  
Pedro Barroso ◽  
Pedro Santa-Clara
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Current Account ◽  
Sharpe Ratio ◽  
Optimal Portfolio ◽  
Crash Risk ◽  
Portfolio Performance ◽  
Carry Trade ◽  
The Real ◽  
Out Of Sample

AbstractWe test the relevance of technical and fundamental variables in forming currency portfolios. Carry, momentum, and value reversal all contribute to portfolio performance, whereas the real exchange rate and the current account do not. The resulting optimal portfolio produces out-of-sample returns that are not explained by risk and are valuable to diversified investors holding stocks and bonds. Exposure to currencies increases the Sharpe ratio of diversified portfolios by 0.5 on average, while reducing crash risk. We argue that besides risk, currency returns reflect the scarcity of speculative capital.

Topics in finance and risk management

2018 ◽  
Author(s):  
Hans Fehr ◽  
Fabian Kindermann
Keyword(s):  
Portfolio Choice ◽  
Market Price ◽  
Theoretical Background ◽  
Optimal Portfolio ◽  
Corporate Bond ◽  
Choice Problem ◽  
Risk And Return ◽  
Risky Assets ◽  
Credit Risk Measurement ◽  
Portfolio Structure

This chapter introduces basic concepts of modern finance theory and demonstrates how to apply them in complex real-world problems. Financial deals and investment decisions are typically determined under uncertainty.Therefore, although this chapter is self-contained, we have to expect some theoretical background in individual decisionmaking and optimal investment under uncertainty. We organize our discussion into four central sections. The starting point is a portfolio choice problem, where an investor has to choose between different assets with specific risk and return characteristics. We then move on to some option pricing applications. We first derive analytical formulas and then evaluate numerical procedures for pricing European and American options as well as more exotic option products. The third section elaborates on credit risk measurement and management using a corporate bond portfolio as example. In the last section we discuss mortality risk and the optimal portfolio structure of a life insurance company. This section provides different numerical approaches to find an optimal portfolio structure with many risky assets. It begins with simple measures of risk and return of a single asset and then develops decision rules to choose optimal portfolios that maximize expected utility of wealth in worlds without and with riskless borrowing and lending opportunities. The purpose of this section is to optimize a portfolio of equity shares and a risk-free investment opportunity. The investor faces the most basic two-period investment choice problem: He buys assets in the first period and these assets pay off in the next period. The problem of the investor is to choose from i = 1, . . . ,N risky assets which may be shares, bonds, real estate, etc. The gross return of each asset i is denoted by rit = qit/qit−1 − 1, where qit−1 is the first-period market price and qit − qit−1 the second-period payoff.

OPTIMAL PORTFOLIO, CONSUMPTION-LEISURE AND RETIREMENT CHOICE PROBLEM WITH CES UTILITY

2008 ◽  
Vol 18 (3) ◽  
pp. 445-472 ◽  
Author(s):  
Kyoung Jin Choi ◽  
Gyoocheol Shim ◽  
Yong Hyun Shin
Keyword(s):  
Optimal Portfolio ◽  
Choice Problem

scholarly journals Loom of Symmetric Pass-Through

Economies ◽  
2019 ◽  
Vol 7 (1) ◽  
pp. 11
Author(s):  
Afsin Sahin
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Stock Prices ◽  
Real Interest Rate ◽  
Deposit Rate ◽  
The Real ◽  
Lending Rate ◽  
Lending Rates ◽  
Pass Through

This paper analyzes the effects of the real policy interest rate on the banking sector lending rate, the deposit rate, real stock prices, and the real exchange rate using the Engle Granger cointegration method (EG), the vector error-correction model (VECM), and the nonlinear vector error-correction model (NVECM) with monthly Turkish data over the period January 2002–April 2018. (1) EG results indicate bivariate cointegration relationships between the real interest rate, lending rates, and the deposit rate. The real interest rate increases all lending rates, mainly the housing rate. However, the long-run coefficient for the real exchange rate is not statistically significant. The pass-through is higher for the deposit rate than for lending rates. Moreoever, real stock prices shrink substantially where the finance sector has been affected the most. (2) VECM results indicate a cointegration relationship between all the variables except for the real exchange rate, which has a statistically non-significant pass-through coefficient. The real interest rate has a noteworthy long-run positive effect on the housing loans lending rate compared to others. The affirmative effect on real stock prices is the highest for the technology sector. The short-run effect of the real interest rate on lending rates, real stock prices and the real exchange rate are statistically non-significant except for the overall stock price index, and the vehicle loans lending rate which has a higher coefficient than the deposit rate. (3) NVECM results allow testing of eleven hypotheses and highlight the symmetric relationship and the valid pass-through effect, and reject the strong exogeneity assumption for all variables.

scholarly journals A tractable model for indices approximating the growth optimal portfolio

2014 ◽  
Vol 18 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Jan Baldeaux ◽  
Katja Ignatieva ◽  
Eckhard Platen
Keyword(s):  
Probability Measure ◽  
Real World ◽  
Contingent Claims ◽  
Optimal Portfolio ◽  
Time Dependent ◽  
Constant Elasticity ◽  
Growth Optimal Portfolio ◽  
Constant Elasticity Of Variance ◽  
The Real ◽  
Equity Index

AbstractThe growth optimal portfolio (GOP) plays an important role in finance, where it serves as the numéraire portfolio, with respect to which contingent claims can be priced under the real world probability measure. This paper models the GOP using a time dependent constant elasticity of variance (TCEV) model. The TCEV model has high tractability for a range of derivative prices and fits well the dynamics of a global diversified world equity index. This is confirmed when pricing and hedging various derivatives using this index.

scholarly journals Real Deposit Rate and Credit Supply Nexus in ECOWAS Evidence From DCCE-MG and PMG Techniques

2020 ◽  
Author(s):  
Bosede Ngozi ADELEYE ◽  
Michael ADUSEI ◽  
Olayinka OLOHUNLANA ◽  
Opeyemi AKINYEMI-BABAJIDE ◽  
Arumugam SANAKARAN
Keyword(s):  
Interest Rate ◽  
Causality Test ◽  
Deposit Rate ◽  
The Real ◽  
Credit Supply ◽  
Country Level ◽  
Pooled Mean Group ◽  
Long Run ◽  
Common Correlated Effects

Abstract This study interrogates the McKinnon-Shaw hypothesis that artificial depression of the real deposit interest rate depresses the supply of credit by banks. The sample coverage from 1980 to 2015 consists of ten members of the Economic Community of West African States made up of Communauté Financière d'Afrique (CFA) and non-CFA countries. This two groups have very different monetary structures. Engaging the dynamic common correlated effects-mean group (DCCE-MG) and pooled mean group (PMG) techniques, findings validate the hypothesis as the real deposit rate exhibits a positive and long-run impact on credit supply. Monotonic impact is not sustained. These outcomes are corroborated with robustness checks from the respective sub-samples though country-level results are mixed. Similarly, causality test shows that the real deposit rate Granger-causes credit supply in the long-run. Overall, the findings support the McKinnon-Shaw hypothesis that interest rate is an essential ingredient in the intermediation role of the financial system.

Optimal Portfolio Choice with Estimation Risk: No Risk-Free Asset Case

2021 ◽  
Author(s):  
Raymond Kan ◽  
Xiaolu Wang ◽  
Guofu Zhou
Keyword(s):  
Portfolio Choice ◽  
Exact Distribution ◽  
Optimal Portfolio ◽  
Portfolio Construction ◽  
Estimation Risk ◽  
Choice Problem ◽  
Out Of Sample ◽  
Mean Variance Portfolio ◽  
Mean Variance ◽  
Explicit Expressions

We propose an optimal combining strategy to mitigate estimation risk for the popular mean-variance portfolio choice problem in the case without a risk-free asset. We find that our strategy performs well in general, and it can be applied to known estimated rules and the resulting new rules outperform the original ones. We further obtain the exact distribution of the out-of-sample returns and explicit expressions of the expected out-of-sample utilities of the combining strategy, providing not only a fast and accurate way of evaluating the performance, but also analytical insights into the portfolio construction. This paper was accepted by Tyler Shumway, finance.

Sign in / Sign up

Export Citation Format

Share Document