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Titolo: On optimal portfolio choice under stochastic interest rates
Autore: Lioui, A; Poncet, P;
 Indirizzi:
 ESSEC, Dept Finance, F95021 Cergy, France ESSEC Cergy France F95021ESSEC, Dept Finance, F95021 Cergy, France Bar Ilan Univ, Dept Econ, IL52900 Ramat Gan, Israel Bar Ilan Univ Ramat Gan Israel IL52900 Econ, IL52900 Ramat Gan, Israel Univ Paris 01, UFR06, Dept Gest, F75231 Paris, France Univ Paris 01 Paris France F75231 R06, Dept Gest, F75231 Paris, France
 Titolo Testata:
 JOURNAL OF ECONOMIC DYNAMICS & CONTROL
fascicolo: 11,
volume: 25,
anno: 2001,
pagine: 1841  1865
 SICI:
 01651889(200111)25:11<1841:OOPCUS>2.0.ZU;29
 Fonte:
 ISI
 Lingua:
 ENG
 Soggetto:
 DYNAMIC FUTURES MARKET; ASSET PRICING MODEL; CONTINGENT CLAIMS; TERM STRUCTURE; INCOMPLETE MARKETS; CONSUMPTION; ARBITRAGE; POLICIES; INVESTMENT; VALUATION;
 Keywords:
 portfolio choice theory; hedging; interest rate risk; financial futures; market price of risk;
 Tipo documento:
 Article
 Natura:
 Periodico
 Settore Disciplinare:
 Social & Behavioral Sciences
 Citazioni:
 33
 Recensione:
 Indirizzi per estratti:
 Indirizzo: Poncet, P ESSEC, Dept Finance, Ave Bernard Hirsch,BP 105, F95021 Cergy, France ESSEC Ave Bernard Hirsch,BP 105 Cergy France F95021 gy, France



 Citazione:
 A. Lioui e P. Poncet, "On optimal portfolio choice under stochastic interest rates", J ECON DYN, 25(11), 2001, pp. 18411865
Abstract
In an economy where interest rates and stock price changes follow fairly general stochastic processes, we analyze the portfolio problem of an investor endowed with a nontraded cash bond position. He can trade on stocks, theriskless asset and a futures contract written on the bond so as to maximize the expected utility of his terminal wealth. When the investment opportunity set is driven by an arbitrary number of state variables, the optimal portfolio strategy is known to contain a pure, preference free, hedge component, a speculative element and MertonBreeden hedging terms against the fluctuations of each and every state variable. While the first two components are well identified and easy to work out, the implementation of the last ones is problematic as the investor must identify all the relevant state variables and estimate their distribution characteristics. Using the martingale approach, we show that the optimal strategy can be simplified to include, in addition to the pure hedge and speculative components, only two MertonBreedentype hedging elements, however large is the number of state variables. The first one is associated with interest rate risk and the second one with the risk brought about by the comovements of the spot interest rate andthe market prices of risk. The implementation of the optimal strategy is thus much easier, as it involves estimating the characteristics of the yieldcurve and the market prices of risk only rather than those of numerous (a priori unknown) state variables. Moreover. the investor's horizon is shown explicitly to play a crucial role in the optimal strategy design, in sharp contrast with the traditional decomposition. Finally, the role of interest rate risk in actual portfolio risk management is emphasized. (C) 2001 Elsevier Science B.V. All rights reserved.
ASDD Area Sistemi Dipartimentali e Documentali, Università di Bologna, Catalogo delle riviste ed altri periodici
Documento generato il 14/07/20 alle ore 11:58:06