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

Abstract (English)

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.