This paper studies an insurer's optimal investment portfolio under the mean-variance criterion. The financial market consists of a riskless bond and risky asset, latter's volatility is random. We are extending Cox–Ingersoll–Ross (CIR) model to case with jumps, where it modeled by jump-diffusion stochastic differential equation (SDE). use Lévy SDE describe risk process we have, in which extend c...

Mean-variance (MV) analysis is often sensitive to model mis-specification or uncertainty, meaning that the MV efficient portfolios constructed with an estimate of the model parameters (i.e., the expected return vector and covariance of asset returns) can give very poor performance for another set of parameters that is similar and statistically hard to distinguish from the one used in the analys...

In their paper, “On the Cross-sectional Relation between Expected Returns and Betas”, Roll and Ross (1994) demonstrated that the expected returns and betas can have zero relationship even when the underlying market portfolio proxies are nearby the efficient frontier. In this note, we provide the mathematical details that lead to their conclusion and further show that their claim needs not hold ...

Using geometric illustrations, we investigate what implications of portfolio optimization in equilibrium can be generated by the simple mean-variance framework, under margin borrowing restrictions. First, we investigate the case of uniform marginability on all risky assets. It is shown that changing from unlimited borrowing to margin borrowing shifts the market portfolio to a riskier combinatio...

This paper investigates a mean-variance portfolio selection problem in continuous time with fixed and proportional transaction costs. Utilizing the dynamic programming, the Hamilton-Jacobi-Bellman (HJB) equation is derived, and the explicit closed form solution is obtained. Furthermore, the optimal strategies and efficient frontiers are also proposed for the original mean-variance problem. Nume...

Abstract This paper investigates a multi-period mean-variance portfolio selection with regime switching and uncertain exit time. The returns of assets all depend on the states of the stochastic market which are assumed to follow a discrete-time Markov chain. The authors derive the optimal strategy and the efficient frontier of the model in closed-form. Some results in the existing literature ar...

The research focus of the scientific paper is on the problem of equity portfolio construction. The author recommends applying frontier analysis technique such as Data Envelopment Analysis to the performance measurement of emitters. Using modern computer technologies, the author has calculated efficiency score of twenty Baltic companies which are quoted at NASDAQ OMX Riga and NASDAQ OMX Tallinn ...

Purpose Using a portfolio comprising liquid global stocks and bonds, this study aims to limit absolute risk that of standardised benchmark determine whether has significant impact on expected return in both high volatility period (HV) low (LV). Design/methodology/approach traditional 40% equity 60% constant tracking error (TE) frontier was constructed implemented. Portfolio performance for diff...

The stochastic nature of financial markets is a barrier for successful portfolio management. Besides traditional Markowitz’s model, many other portfolio selection models in Bayesian and Non-Bayesian frameworks have been developed. Starting with the basic Markowitz model, several cardinal models are used to find optimum portfolios with select stock set. Having developed the regression model of t...

Conventionally, portfolio selection problems are solved with quadratic or linear programming models. However, the solutions obtained by these methods are in real numbers and difficult to implement because each asset usually has its minimum transaction lot. Methods considering minimum transaction lots were developed based on some linear portfolio optimization models. However, no study has ever i...