Optimal portfolios with a positive lower bound on final wealth

Ralf Korn

Quantitative Finance, 2005, vol. 5, issue 3, 315-321

Abstract: We consider the determination of optimal portfolios under a lower bound on the final wealth. Possible applications range from capital guarantee strategies over life insurance investment where part of the benefit is a guaranteed return on capital to continuous-time mean-variance problems with a strictly positive lower bound. Our solution method consists of transforming the original problem into a portfolio problem without a positive lower bound but a transformed utility function and a modified initial wealth.

Keywords: Optimal portfolios; Lower bound; Capital guarantee; Martingale method (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (12)

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DOI: 10.1080/14697680500167927

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