On the Effect of Premia and Penalties on the Optimal Portfolio Choice Report as inadecuate




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Abstract

In a standard portfolio choice between a risky and a safe asset, we study the effect of imposing premia and penalties conditional on the realized return of the portfolio meeting a given threshold. We show that thresholds set at -intermediate levels- have the effect to increase the optimal share of the safe asset, while very low and very high thresholds may induce larger shares of the risky investment if a condition on the curvature of the utility function holds.



Item Type: MPRA Paper -

Original Title: On the Effect of Premia and Penalties on the Optimal Portfolio Choice-

English Title: On the Effect of Premia and Penalties on the Optimal Portfolio Choice-

Language: English-

Keywords: Portfolio, Premium, Risk Aversion-

Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric ModelingC - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation ModelingD - Microeconomics > D0 - GeneralG - Financial Economics > G0 - GeneralM - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - GeneralM - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - General > M00 - General-





Author: Currarini, Sergio

Source: https://mpra.ub.uni-muenchen.de/70726/







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