Portfolio Selection: A Review

Jerome Detemple

Journal of Optimization Theory and Applications, 2014, vol. 161, issue 1, No 1, 21 pages

Abstract: Abstract This paper reviews portfolio selection models and provides perspective on some open issues. It starts with a review of the classic Markowitz mean-variance framework. It then presents the intertemporal portfolio choice approach developed by Merton and the fundamental notion of dynamic hedging. Martingale methods and resulting portfolio formulas are also reviewed. Their usefulness for economic insights and numerical implementations is illustrated. Areas of future research are outlined.

Keywords: Portfolio choice; Mean-variance model; Diffusion models; Complete markets; Monte Carlo simulation; Malliavin derivative; Dynamic hedging; Bond numeraire (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s10957-012-0208-1

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