On the computation of optimal monotone mean–variance portfolios via truncated quadratic utility
AbstractWe report a surprising link between optimal portfolios generated by a special type of variational preferences called divergence preferences (see Maccheroni et al., 2006) and optimal portfolios generated by classical expected utility. As a special case, we connect optimization of truncated quadratic utility (see Černý, 2003) to the optimal monotone mean–variance portfolios (see Maccheroni et al., 2009), thus simplifying the computation of the latter.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Mathematical Economics.
Volume (Year): 48 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/jmateco
Optimal portfolio; Truncated quadratic utility; Monotone mean–variance preferences; Divergence preferences; HARA utility; Monotone hull; Translation-invariant hull;
Other versions of this item:
- Ales Cerný & Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2008. "On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility," Carlo Alberto Notebooks 79, Collegio Carlo Alberto.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
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