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 (cf. ) and optimal portfolios generated by classical expected utility. As a special case we connect optimization of truncated quadratic utility (cf. ) to the optimal monotone mean-variance portfolios (cf. ), thus simplifying the computation of the latter.
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Bibliographic InfoPaper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 79.
Length: 19 pages
Date of creation: 2008
Date of revision:
optimal portfolio; truncated quadratic utility; monotone mean-variance preferences; divergence preferences; HARA utility;
Other versions of this item:
- Černý, Aleš & Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2012. "On the computation of optimal monotone mean–variance portfolios via truncated quadratic utility," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 386-395.
- 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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