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Optimal Portfolio Selection for Cash-Flows with Bounded Capital at Risk

Author

Listed:
  • D. Vyncke
  • M. Goovaerts
  • J. Dhaene
  • S. Vanduffel

Abstract

We consider a continuous-time Markowitz type portfolio problem that consists of minimizing the discounted cost of a given cash-fl ow under the constraint of a restricted Capital at Risk. In a Black-Scholes setting, upper and lower bounds are obtained by means of simple analytical expressions that avoid the classical simulation approach for this type of problems. The problem is easily extended to cope with more general discount processes.

Suggested Citation

  • D. Vyncke & M. Goovaerts & J. Dhaene & S. Vanduffel, 2005. "Optimal Portfolio Selection for Cash-Flows with Bounded Capital at Risk," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(1), pages 103-114.
  • Handle: RePEc:ete:revbec:20050109
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