Portfolio selection with options

Marco Cassader () and Sergio Ortobelli Lozza ()

No 1303_qum, Working Papers (2013-) from University of Bergamo, Department of Management, Economics and Quantitative Methods

Abstract: We describe an optimization model to evaluate the portfolio performance in the option’s market. Hedgers, managers and investors, in agreement with Markovitz’s theory, aimed at creating a portfolio made up by assets with negative correlation, so as to have a portfolio not linked to the economic cycle. The optimization portfolio problem with contingent claims allows to create wealth also in financial crisis without using short selling, since option returns show a strong negative correlation. The basic idea of this work is using only trading price options, in particular those written on principal stock Indexes, in order to create a diversified portfolio. Thus we propose an ex post analysis over a two-years period using different international portfolio strategies on the derivative market.

Keywords: portfolio selection; call and put; performance strategy; liquidity constrains (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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