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Portfolio Selection Model with Derivative Securities(PDF)

Transactions of Tianjin University[ISSN:1006-4982/CN:12-1248/T]

Issue:
2003年01期
Page:
68-70
Publishing date:

Info

Title:
Portfolio Selection Model with Derivative Securities
Author(s):
WANG Chun feng YANG Jian lin JIANG Xiang lin
(School of Management, Tianjin University,Tianjin 300072, China)
Keywords:
DOI:

Abstract:
Traditional portfolio theory assumes that the return rate of portfolio follows normality. However, this assumption is not true when derivative assets are incorporated. In this paper a portfolio selection model is developed based on utility function which can capture asymmetries in random variable distributions. Other realistic conditions are also considered, such as liabilities and integer decision variables. Since the resulting model is a complex mixed integer nonlinear programming problem, simulated annealing algorithm is applied for its solution. A numerical example is given and sensitivity analysis is conducted for the model.

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Last Update: 2011-05-02