Title

Growth Maximization and Downside Protection Using Power-Log Utility Functions for Optimizing Portfolios with Derivatives

SMC Author

Jivendra Kale

SMC Affiliated Work

1

Status

Faculty

School

School of Economics and Business Administration

Department

Finance

Document Type

Article

Publication Date

2009

Publication Title

International Journal of Computer Applications in Technology

Description/Abstract

The tremendous growth in derivative markets around the world and the high quality of information about these instruments that is widely available, offers us a new opportunity harness their unique return distribution characteristics for building portfolios that conform more closely to investor preferences than is possible with mean-variance analysis and portfolio insurance techniques for downside protection. This study shows how portfolio optimization with Power-Log utility functions can be used to optimize portfolios containing derivatives, to produce portfolios with high growth potential and built-in downside protection. It also compares this method of portfolio construction with portfolio insurance, which has been used for providing downside protection to portfolios.

Scholarly

yes

Disciplines

Business | Economics | Finance and Financial Management

Original Citation

Kale, J. (2009). Growth Maximization and Downside Protection using Power-Log Utility Functions for Optimizing Portfolios with Derivatives. International Journal of Computer Applications in Technology

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