Optimal portfolio selection in incomplete markets
Type Research Project
Duration since Sept. 1, 2011
- Institute for Financial Research IN (Details)
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- Hledik, Juraj (Former researcher) Project Head
We derive an explicit solution for covariance between european options under the assumption of incomplete markets. We use this object to create a trading strategy based on mean-variance preferences. Consequently, we compare the distribution of implied P&L ratio with other commonly used strategies using monte carlo simulation and argue about its effectiveness.