The presence of options in a portfolio fundamentally alters the portfolio’s risk and return profiles when compared to an all equity portfolio. In this paper, we advocate modeling a risk-based criterion for optioned portfolio selection and rebalancing problems. The criterion is inspired by Chicago Mercantile Exchange’s risk-based margining system which sets the collateralization requirements on ...

this paper presents dynamic portfolio model based on the merton's optimal investment-consumption model, which combines dynamic synthetic put option using risk-free and risky assets. this paper is extended version of methodological paper published by yuan yao (2012) cite{26}. because of the long history of the development of foreign financial market, with a variety of financial derivatives, the ...

This paper studies the properties of discrete time stochastic optimal control problems associated with portfolio selection. We investigate if optimal continuous time strategies can be used effectively for a discrete time market after a straightforward discretization. We found that Merton’s strategy approximates the performance of the optimal strategy in a discrete time model with the sufficient...

This paper discusses two optimal allocation problems. We consider different hypotheses of portfolio selection with stable distributed returns for each of them. In particular, we study the optimal allocation between a riskless return and risky stable distributed returns. Furthermore, we examine and compare the optimal allocation obtained with the Gaussian and the stable non-Gaussian distribution...

This paper investigates a fuzzy portfolio selection problem with guaranteed reliability, in which the fuzzy variables are used to capture the uncertain returns of different securities. To effectively handle the fuzziness in a mathematical way, a new expected value operator and variance of fuzzy variables are defined based on the mλ measure that is a linear combination of the possibility measure...

Mean-Variance (MV) theory for portfolio selection is based on assumptions involving parameters that have to be estimated using historical data. Depending on the method of estimation, the estimates will suffer from estimation error and/or specification error, both of which will effect the portfolio optimization in such a way that the resulting optimal portfolio is not the true optimal portfolio....

In this paper, we consider portfolio selection problem in which security returns are regarded as fuzzy variables rather than random variables. We first introduce a concept of absolute deviation for fuzzy variables and prove some useful properties, which imply that absolute deviation may be used to measure risk well. Then we propose two mean-absolute deviation models by defining risk as abs...

Portfolio selection is one of the most important and vital decisions that a real or legal person, who invests in stock market should make. The main purpose of this paper is the determination of the optimal portfolio with regard to stock returns of companies, which are active in Tehran’s stock market. For achieving this purpose, annual statistics of companies’ stocks since Farvardin 1387 until E...

It is a matter of common knowledge that traditional Markowitz optimization based on sample means and covariances performs poorly in practice. For this reason, diverse attempts were made to improve performance of portfolio optimization. In this paper, we investigate three popular portfolio selection models built upon classical meanvariance theory. The first model is an extension of the tradition...