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Martingale Methods in Dynamic Portfolio Allocation with Distortion Operators ∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Hamada, Mahmoud Sherris, Michael Hoek, John Van Der |
| Copyright Year | 2001 |
| Abstract | Standard optimal portfolio choice models assume that investors maximise the expected utility of their future outcomes. However, behaviour which is inconsistent with the expected utility theory has often been observed. In a discrete time setting, we provide a formal treatment of risk measures based on distortion functions that are consistent with Yaari’s dual (non-expected utility) theory of choice (1987), and set out a general layout for portfolio optimisation in this non-expected utility framework using the risk neutral computational approach. As an application, we consider two particular risk measures. The first one is based on the PH-transform and treats the upside and downside of the risk differently. The second one, introduced by Wang (2000) uses a distortion operator based on the cumulative normal distribution function. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://wwwdocs.fce.unsw.edu.au/actuarial/research/papers/2001/afir2001ms.pdf |
| Alternate Webpage(s) | http://www.business.uts.edu.au/finance/resources/qmf2001/Hamada_M.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
