Optimal Design of Multi-Asset Options
The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk, return) = (−infinity, +infinity) in a portfolio choice problem. The construction of a portfolio of derivatives with high expected returns and very negative downside risk (henceforth “...
| Autores: | , , |
|---|---|
| Tipo de documento: | artigo |
| Data de publicação: | 2025 |
| País: | España |
| Recursos: | Universidad Complutense de Madrid (UCM) |
| Repositório: | Docta Complutense |
| Idioma: | inglês |
| OAI Identifier: | oai:docta.ucm.es:20.500.14352/129196 |
| Acesso em linha: | https://hdl.handle.net/20.500.14352/129196 |
| Access Level: | Acceso aberto |
| Palavra-chave: | G13 G11 C61 multi-asset derivative downside risk measure unbounded market price of risk golden strategy Ciencias Sociales Ciencias 53 Ciencias Económicas 12 Matemáticas |
| Resumo: | The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk, return) = (−infinity, +infinity) in a portfolio choice problem. The construction of a portfolio of derivatives with high expected returns and very negative downside risk (henceforth “golden strategy”) has only been studied if all the involved derivatives have the same underlying asset. This paper also considers multiasset derivatives, gives practical methods to build multi-asset golden strategies for both the expected shortfall and the expectile risk measure, and shows that the use of multi-asset options makes the performance of the obtained golden strategy more efficient. Practical rules are given under the Black–Scholes–Merton multi-dimensional pricing model. |
|---|