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Buy-and-Hold Strategies and Comonotonic Approximations

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  • J. Marin-Solano (Universitat de Barcelona)
  • O. Roch (Universitat de Barcelona)
  • J. Dhaene (Katholieke Univerisiteit Leuven)
  • C. Ribas (Universitat de Barcelona)
  • M. Bosch-Princep (Universitat de Barcelona)
  • S. Vanduffel (Katholieke Universiteit Leuven)

    (Universitat de Barcelona)

Abstract

We investigate optimal buy-and-hold strategies for terminal wealth problems in a multi-period framework. As terminal wealth is a sum of dependent random variables, each of these variables corresponding to an amount of capital that has been invested in a particular asset at a particular date, we first consider approximations that reduce the multivariate randomness to univariate randomness. Next, these approximations are used to determine buy-and-hold strategies that optimize, for a given probability level, the Value at Risk and the Conditional Left Tail Expectation of the distribution function of final wealth. This paper complements Dhaene et al. (2005), where the case of continuous rebalancing is considered.

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Bibliographic Info

Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 213.

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Length: 0 pages
Date of creation: 2009
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Handle: RePEc:bar:bedcje:2009213

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  1. Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: theory," Insurance: Mathematics and Economics, Elsevier, vol. 31(1), pages 3-33, August.
  2. Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: applications," Insurance: Mathematics and Economics, Elsevier, vol. 31(2), pages 133-161, October.
  3. Kaas, Rob & Dhaene, Jan & Goovaerts, Marc J., 2000. "Upper and lower bounds for sums of random variables," Insurance: Mathematics and Economics, Elsevier, vol. 27(2), pages 151-168, October.
  4. J. Dhaene & S. Vanduffel & M. J. Goovaerts & R. Kaas & D. Vyncke, 2005. "Comonotonic Approximations for Optimal Portfolio Selection Problems," Journal of Risk & Insurance, The American Risk and Insurance Association, The American Risk and Insurance Association, vol. 72(2), pages 253-300.
  5. Cesari, Riccardo & Cremonini, David, 2003. "Benchmarking, portfolio insurance and technical analysis: a Monte Carlo comparison of dynamic strategies of asset allocation," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 27(6), pages 987-1011, April.
  6. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 58, Massachusetts Institute of Technology (MIT), Department of Economics.
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