Optimal Design of Multi-Asset Options

Alejandro Balbás (), Beatriz Balbás and Raquel Balbás
Additional contact information
Alejandro Balbás: Department of Business Administration, University Carlos III of Madrid, C/Madrid, 126, 28903 Getafe, Madrid, Spain
Beatriz Balbás: Department of Economics and Business Administration, University of Alcalá, Pl. de la Victoria, 2, 28802 Alcalá de Henares, Madrid, Spain
Raquel Balbás: Department of Financial and Actuarial Economics and Statistics, University Complutense of Madrid, 28223 Pozuelo de Alarcón, Madrid, Spain

Risks, 2025, vol. 13, issue 1, 1-20

Abstract: The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk, return) = (−infinity, +infinity) in a portfolio choice problem. The construction of a portfolio of derivatives with high expected returns and very negative downside risk (henceforth “golden strategy”) has only been studied if all the involved derivatives have the same underlying asset. This paper also considers multi-asset derivatives, gives practical methods to build multi-asset golden strategies for both the expected shortfall and the expectile risk measure, and shows that the use of multi-asset options makes the performance of the obtained golden strategy more efficient. Practical rules are given under the Black–Scholes–Merton multi-dimensional pricing model.

Keywords: multi-asset derivative; downside risk measure; unbounded market price of risk; golden strategy (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/13/1/16/pdf (application/pdf)
https://www.mdpi.com/2227-9091/13/1/16/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:13:y:2025:i:1:p:16-:d:1568739

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().