On minimising a portfolio's shortfall probability

Anatolii A. Puhalskii and Michael Jay Stutzer

Papers from arXiv.org

Abstract: We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian motions with the coefficients depending on an economic factor, possibly nonlinearly. The economic factor is modelled with a general Ito equation. The bound is shown to be tight. More specifically, epsilon-optimal portfolios are obtained under additional conditions.

Date: 2016-02, Revised 2017-05
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1602.02192

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