This paper investigates and compares the performances of the optimal portfolio selected by using the Orthogonal GARCH (OGARCH) Model, Markov Switching Model and the Exponentially Weighted Moving Average (EWMA) Model in a fund of hedge funds. These models are used to calibrate the returns of four HFRX indices from which the optimal portfolio is constructed using the Mean-Variance method. The per...

We consider the Merton problem of optimal portfolio choice when the traded instruments are the set of zero-coupon bonds. Working within a Markovian Heath–Jarrow–Morton model of the interest rate term structure driven by an infinite-dimensional Wiener process, we give sufficient conditions for the existence and uniqueness of an optimal trading strategy. When there is uniqueness, we provide a cha...

This research introduces a new mixed-integer nonlinear goal program (MINLGP) with branch and bound constraints and a separable programming foundation. The motivation for creating the MINLGP algorithm is to advance the ability of portfolio managers facing multiple and hierarchical goals to simultaneously solve for an efficient portfolio with an optimal number of contingent claim contracts in ord...

This paper investigates continuous-time optimal portfolio and consumption problems under loss aversion in an infinite horizon. The investor’s goal is to choose optimal portfolio and consumption policies to maximize total discounted S-shaped utility from consumption. The consumption rate process is subject to a downside constraint. The optimal consumption and portfolio policies are obtained thro...

This paper derives in closed form the optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal updated portfolio is a linear combination of the existing portfolio, the optimal portfolio absent trading costs, and the optimal portfolio based on future expected returns and transaction costs. Predictors...