Structured products under generalized kappa ratio

Rania Hentati ()
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Rania Hentati: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We examine the maximization problem of performance measure of financial structured products. For this purpose, we introduce the kappa ratios, based on downside risk measures which take account of the asymmetry of the return probability distribution. First, we deal with the optimization of some standard structured portfolios. We examine in particular the optimal combination of risk free, stock and call/put instruments with respect to kappa performance measures and in particular to the Sharpe–Omega ratio. Then, we provide the general solution of the optimal positioning problem with respect to kappa ratios. We analyze its properties and compare it to the portfolio profile that is optimal with respect to the standard expected utility criterion.

Keywords: Structured portfolio; Performance measure; Optimal positioning; Kappa measure; Sharpe–Omega ratio; Sortino ratio (search for similar items in EconPapers)
Date: 2016-11
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Published in Economic Modelling, 2016, 58, pp.599-614. ⟨10.1016/j.econmod.2016.03.009⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01306629

DOI: 10.1016/j.econmod.2016.03.009

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