An Alternative Approach to Portfolio Selection Problem via Stochastic Differential Delay Equations
AbstractThis paper presents an alternative method to the portfolio selection problem. The central hypothesis is that the historical performance of the market can not be ignored. Consequently, we suppose that the price dynamics of any asset will be described by a stochastic differential delay equation: dP(t) = [aP(t) + bP (t − r)]dt + P(t)dW(t). We will illustrate our model by a numerical example and will compare the results with those derived from the classical model of Markowitz.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6080.
Date of creation: 04 Dec 2007
Date of revision:
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
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