- Optimal portfolio selection for cashflows with bounded capital at risk
- Tijdschrift voor economie en management
- Volume | Issue number
- 50 | 1
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
We consider a continuous-time Markowitz type portfolio problem that consists
of minimizing the discounted cost of a given cash-fl ow under the constraint of
a restricted Capital at Risk. In a Black-Scholes setting, upper and lower bounds
are obtained by means of simple analytical expressions that avoid the classical
simulation approach for this type of problems. The problem is easily extended
to cope with more general discount processes.
Keywords: Black-Scholes model, Capital at Risk, portfolio optimization, Value
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