Growth Maximization and Downside Protection Using Power-Log Utility Functions for Optimizing Portfolios with Derivatives
SMC Affiliated Work
1
Status
Faculty
School
School of Economics and Business Administration
Department
Finance
Document Type
Article
Publication Date
2009
Publication / Conference / Sponsorship
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
Repository Citation
Kale, Jivendra. Growth Maximization and Downside Protection Using Power-Log Utility Functions for Optimizing Portfolios with Derivatives (2009). International Journal of Computer Applications in Technology. [article]. https://digitalcommons.stmarys-ca.edu/school-economics-business-faculty-works/453
