The dynamic portfolio decisionmaking model with three-fund separation theorem based on stochastic benchmark

WANG XiuGuo1;ZHOU RongXi2*

Journal of Beijing University of Chemical Technology ›› 2007, Vol. 34 ›› Issue (4) : 441-445.

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Journal of Beijing University of Chemical Technology ›› 2007, Vol. 34 ›› Issue (4) : 441-445.
管理与数理科学

The dynamic portfolio decisionmaking model with three-fund separation theorem based on stochastic benchmark

  • WANG XiuGuo1;ZHOU RongXi2*
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Abstract

Under the BlackScholes type financial market, a dynamic portfolio decisionmaking model is proposed, where the expected relative terminal wealth is maximized under a constraint on the shortfall probability below a benchmark defined by a stochastic process. Stochastic analysis method and nonlinear programming theory are applied to obtain the explicit solutions of the optimal strategies and the efficient frontiers. The results exhibit three-fund separation theorem which include the riskless asset, revised market portfolio and benchmark portfolio. Numerical examples are presented.

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WANG XiuGuo1;ZHOU RongXi2*. The dynamic portfolio decisionmaking model with three-fund separation theorem based on stochastic benchmark[J]. Journal of Beijing University of Chemical Technology, 2007, 34(4): 441-445

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