OPTIMAL INVESTMENT PROBLEM
WITH OPTION
Meena Baweja$^1$, Ratnesh R. Saxena$^2$, Deepak Sehgal$^3$
$^{1}$Department of Mathematics
University of Delhi
Delhi, 110007, INDIA
$^2$Department of Mathematics
Deen Dayal Upadhyay College (University of Delhi)
Karam Pura, New Delhi, 110015, INDIA
$^3$Department of Commerce
Deen Dayal Upadhyay College (University of Delhi)
Karam Pura, New Delhi, 110015, INDIA
Abstract. In this paper, the aim of the investor is to maximize expected return for a given level of risk. The model is based on a particular risk measure conditional value-at-risk (CVaR), the expected loss exceeding Value-at-Risk. The portfolio is optimized for investment in equity, debt and option on equity. In order to enhance the return potential, the expected return of intermittent re-investment payment obtained from option is also optimized. We develop a method to deal with the maximization of return of a portfolio in a two period context extending the work of Korn and Zeytun [4].
AMS Subject classification: 49N05, 65K10
Keywords and phrases: large scale optimization, portfolio theory, conditional value-at-risk, option, stochastic simulation optimization


Download full article from here (pdf format).

DOI: 10.12732/ijam.v28i4.5

Volume: 28
Issue: 4
Year: 2015