scholarly journals ON OPTIMAL STRATEGIES FOR UTILITY MAXIMIZERS IN THE ARBITRAGE PRICING MODEL

2016 ◽  
Vol 19 (07) ◽  
pp. 1650047 ◽  
Author(s):  
MIKLÓS RÁSONYI
Keyword(s):  
Expected Utility ◽  
Optimal Strategies ◽  
Asset Returns ◽  
Optimal Investment ◽  
Pricing Model ◽  
Arbitrage Pricing ◽  
Asset Return ◽  
Return Distributions ◽  
Restrictive Hypothesis

We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal strategies. Previous results required a certain restrictive hypothesis on the tails of asset return distributions. Using a different method, we manage to remove this hypothesis, at the price of stronger assumptions on the moments of asset returns.

scholarly journals Optimal Investment and Bounded Ruin Probability: Constant Portfolio Strategies and Mean-variance Analysis

2008 ◽  
Vol 38 (2) ◽  
pp. 423-440 ◽  
Author(s):  
Ralf Korn ◽  
Anke Wiese
Keyword(s):  
Expected Utility ◽  
Ruin Probability ◽  
Optimal Strategies ◽  
Optimal Investment ◽  
Risk Process ◽  
Investment Strategies ◽  
Portfolio Strategies ◽  
Classical Risk Process ◽  
Portfolio Optimization Problem ◽  
Mean Variance

We study the continuous-time portfolio optimization problem of an insurer. The wealth of the insurer is given by a classical risk process plus gains from trading in a risky asset, modelled by a geometric Brownian motion. The insurer is not only interested in maximizing the expected utility of wealth but is also concerned about the ruin probability. We thus investigate the problem of optimizing the expected utility for a bounded ruin probability. The corresponding optimal strategy in various special classes of possible investment strategies will be calculated. For means of comparison we also calculate the related mean-variance optimal strategies.

scholarly journals Maximum Entropy Analysis of Consumption-based Capital Asset Pricing Model and Volatility

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Tae-Hwy Lee ◽  
Millie Yi Mao ◽  
Aman Ullah
Keyword(s):  
Asset Pricing ◽  
Regression Function ◽  
Asset Returns ◽  
Capital Asset Pricing ◽  
Return Volatility ◽  
Pricing Model ◽  
Capital Asset ◽  
Consumption Growth ◽  
Asset Return ◽  
Asset Pricing Model

AbstractBased on the maximum entropy (ME) method, we introduce an information theoretic approach to estimating conditional moment functions with incorporating a theoretical constraint implied from the consumption-based capital asset pricing model (CCAPM). Using the ME conditional mean/variance functions obtained from the ME density, we analyze the relationship between asset returns and consumption growth under the theoretical constraint of the CCAPM. We evaluate the predictability of asset return using consumption growth through in-sample estimation and out-of-sample prediction in the ME mean regression function. We also examine the ME variance regression function for the asset return volatility as a function of the consumption growth. Our findings suggest that incorporating the CCAPM constraint can capture the nonlinear predictability of asset returns in mean especially in tails, and that the consumption growth has an effect on reducing stock return volatility, indicating the counter-cyclical variation of stock market volatility.

scholarly journals Optimal Investment and Bounded Ruin Probability: Constant Portfolio Strategies and Mean-variance Analysis

2008 ◽  
Vol 38 (02) ◽  
pp. 423-440 ◽  
Author(s):  
Ralf Korn ◽  
Anke Wiese
Keyword(s):  
Expected Utility ◽  
Ruin Probability ◽  
Optimal Strategies ◽  
Optimal Investment ◽  
Risk Process ◽  
Investment Strategies ◽  
Portfolio Strategies ◽  
Classical Risk Process ◽  
Portfolio Optimization Problem ◽  
Mean Variance

We study the continuous-time portfolio optimization problem of an insurer. The wealth of the insurer is given by a classical risk process plus gains from trading in a risky asset, modelled by a geometric Brownian motion. The insurer is not only interested in maximizing the expected utility of wealth but is also concerned about the ruin probability. We thus investigate the problem of optimizing the expected utility for a bounded ruin probability. The corresponding optimal strategy in various special classes of possible investment strategies will be calculated. For means of comparison we also calculate the related mean-variance optimal strategies.

Expansion methods applied to asset return distributions

2007 ◽  
Vol 10 (2) ◽  
pp. 3-24 ◽  
Author(s):  
Kohei Marumo ◽  
Rodney Wolff
Keyword(s):  
Asset Return ◽  
Return Distributions

The Arbitrage Pricing Model and Returns on Assets Under Uncertain Inflation*

1983 ◽  
Vol 38 (2) ◽  
pp. 525-537 ◽  
Author(s):  
JAMES BICKSLER ◽  
EDWIN ELTON ◽  
MARTIN GRUBER ◽  
JOEL RENTZLER
Keyword(s):  
Pricing Model ◽  
Arbitrage Pricing

scholarly journals EQUILIBRIUM ASSET RETURNS IN FINANCIAL MARKETS

2019 ◽  
Vol 22 (02) ◽  
pp. 1850063 ◽  
Author(s):  
DILIP B. MADAN ◽  
WIM SCHOUTENS
Keyword(s):  
Financial Markets ◽  
Fixed Points ◽  
Asset Prices ◽  
Asset Returns ◽  
Expected Returns ◽  
Response Functions ◽  
Limit Laws ◽  
Return Distributions ◽  
Equilibrium Distributions ◽  
The Cost

Return distributions in the class of pure jump limit laws are observed to reflect numerous asymmetries between the upward and downward motions of asset prices. The return distributions are modeled by self-decomposable parametric laws with all parameters continuously responding to each other. Fixed points of the response functions define equilibrium distributions. The equilibrium distributions that can arise in practice are constrained by the level of return acceptability they may attain. As a consequence, expected returns are equated to risk measured by the cost of purchasing the negative of the centered return. The asymmetries studied include differences in scale, speed, power variation, excitation and cross-excitation.

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