IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0116.html
   My bibliography  Save this article

Risk Management for an Internationally Diversified Portfolio

Author

Listed:
  • Menoncin, Francesco

    () (Università degli studi di Brescia, Dipartimento di Scienze Economiche)

Abstract

In this paper we explicitly compute the optimal asset allocation for an investor maximizing the expected (CRRA) utility of his final wealth in a simple framework with: (i) a stochastic domestic interest rate, (ii) a stochastic exchange rate, (iii) both a domestic and a foreign riskless asset, and (iv) both a domestic and a foreign risky asset. This explicit solution allows us to widely investigate the behaviour of the optimal portfolio hedging component with respect to all the parameters in the model. In particular, we show a numerical simulation for investigating the hedging strategy against the exchange rate risk.

Suggested Citation

  • Menoncin, Francesco, 2005. "Risk Management for an Internationally Diversified Portfolio," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 58(1), pages 9-41.
  • Handle: RePEc:ris:ecoint:0116
    as

    Download full text from publisher

    File URL: http://www.iei1946.it/RePEc/ccg/MENONCIN%209_42.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    More about this item

    Keywords

    International investment; exchange rate risk;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0116. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Procopio). General contact details of provider: http://edirc.repec.org/data/cacogit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.