Portfolio selection and asset pricing under a benchmark approach
The paper presents classical and new results on portfolio optimization, as well as the fair pricing concept for derivative pricing under the benchmark approach. The growth optimal portfolio is shown to be a central object in a market model. It links asset pricing and portfolio optimization. The paper argues that the market portfolio is a proxy of the growth optimal portfolio. By choosing the drift of the discounted growth optimal portfolio as parameter process, one obtains a realistic theoretical market dynamics.
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Volume (Year): 370 (2006)
Issue (Month): 1 ()
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References listed on IDEAS
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- Eckhard Platen, 2006.
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Wiley Blackwell, vol. 16(1), pages 131-151.
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- Eckhard Platen, 2004. "Capital Asset Pricing for Markets with Intensity Based Jumps," Research Paper Series 143, Quantitative Finance Research Centre, University of Technology, Sydney.
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- Eckhard Platen, 2003. "Modeling the Volatility and Expected Value of a Diversified World Index," Research Paper Series 103, Quantitative Finance Research Centre, University of Technology, Sydney.
- Eckhard Platen, 2001.
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Research Paper Series
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- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Eckhard Platen, 2001. "Arbitrage in Continuous Complete Markets," Research Paper Series 72, Quantitative Finance Research Centre, University of Technology, Sydney.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
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