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Lennartsson, J. och Lindberg, C. (2015) *Merton’s problem for an investor with a benchmark in a Barndorff-Nielsen and Shephard market*.

** BibTeX **

@article{

Lennartsson2015,

author={Lennartsson, Jan and Lindberg, Carl},

title={Merton’s problem for an investor with a benchmark in a Barndorff-Nielsen and Shephard market},

journal={SpringerPlus},

issn={2193-1801},

volume={4},

issue={1},

pages={artikel 87},

abstract={To try to outperform an externally given benchmark with known weights is the most common equity mandate in the financial industry. For quantitative investors, this task is predominantly approached by optimizing their portfolios consecutively over short time horizons with one-period models. We seek in this paper to provide a theoretical justification to this practice when the underlying market is of Barndorff-Nielsen and Shephard type. This
is done by verifying that an investor who seeks to maximize her expected terminal exponential utility of wealth in excess of her benchmark will in fact use an optimal portfolio equivalent to the one-period Markowitz mean-variance problem in continuum under the corresponding Black-Scholes market. Further, we can represent the solution to the optimization problem as in Feynman-Kac form. Hence, the problem, and its solution, is completely analogous to
Merton’s classical portfolio problem, with the main difference that Merton (1969) maximizes expected utility of terminal wealth, not wealth in excess of
a benchmark.},

year={2015},

keywords={stochastic control, portfolio optimization, stochastic volatility, benchmark, HJB equation},

note={20},

}

** RefWorks **

RT Journal Article

SR Electronic

ID 201094

A1 Lennartsson, Jan

A1 Lindberg, Carl

T1 Merton’s problem for an investor with a benchmark in a Barndorff-Nielsen and Shephard market

YR 2015

JF SpringerPlus

SN 2193-1801

VO 4

IS 1

AB To try to outperform an externally given benchmark with known weights is the most common equity mandate in the financial industry. For quantitative investors, this task is predominantly approached by optimizing their portfolios consecutively over short time horizons with one-period models. We seek in this paper to provide a theoretical justification to this practice when the underlying market is of Barndorff-Nielsen and Shephard type. This
is done by verifying that an investor who seeks to maximize her expected terminal exponential utility of wealth in excess of her benchmark will in fact use an optimal portfolio equivalent to the one-period Markowitz mean-variance problem in continuum under the corresponding Black-Scholes market. Further, we can represent the solution to the optimization problem as in Feynman-Kac form. Hence, the problem, and its solution, is completely analogous to
Merton’s classical portfolio problem, with the main difference that Merton (1969) maximizes expected utility of terminal wealth, not wealth in excess of
a benchmark.

LA eng

PMID 25774334

DO 10.1186/s40064-015-0842-9

LK http://dx.doi.org/10.1186/s40064-015-0842-9

LK http://publications.lib.chalmers.se/records/fulltext/201094/local_201094.pdf

OL 30