Abstract
For the portfolio manager, composing portfolios that meet the risk-return
preferences of clients can be difficult because an understanding of these
preferences is not always easy to come by. Clients might be able to specify
only the highest level of chance they would accept that the portfolio
underperforms some specific level.
In this paper it is assumed that the portfolio manager is given several of
these so-called confidence limits on shortfall constraints and wants to
compose an optimal portfolio that fulfills these restrictions. The paper
shows how options enable the manager to reach the optimal portfolio via
linear programming.
preferences of clients can be difficult because an understanding of these
preferences is not always easy to come by. Clients might be able to specify
only the highest level of chance they would accept that the portfolio
underperforms some specific level.
In this paper it is assumed that the portfolio manager is given several of
these so-called confidence limits on shortfall constraints and wants to
compose an optimal portfolio that fulfills these restrictions. The paper
shows how options enable the manager to reach the optimal portfolio via
linear programming.
| Original language | English |
|---|---|
| Pages (from-to) | 205-220 |
| Number of pages | 16 |
| Journal | Advances in Quantitative Analysis of Finance and Accounting |
| Volume | 3 |
| Issue number | A |
| Publication status | Published - 1995 |
| Externally published | Yes |