Portfolio Optimization for Credit-Risky Assets under Marshall–Olkin Dependence

Jan-Frederik Mai

Applied Mathematical Finance, 2019, vol. 26, issue 6, 598-618

Abstract: We consider power/logarithmic utility maximization in a multivariate Black–Scholes model that is enhanced by credit risk via the Marshall–Olkin exponential distribution. On the practical side, the model results in an enhancement of the mean variance paradigm, which is easy to interpret and implement. On the theoretical side, the model constitutes a well-justified and intuitive mathematical wrapping to study the effect of extreme and higher-order dependence on optimal portfolios.

Date: 2019
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DOI: 10.1080/1350486X.2020.1727755

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