Optimal financial portfolio and dependence of risky assets

Kais Dachraoui and Georges Dionne ()
Additional contact information
Kais Dachraoui: HEC Montreal, Canada Research Chair in Risk Management

No 00-12, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: In this note we analyze the hedging property of an optimal portfolio with one risk-free asset and two risky assets. We make a restriction on the dependence between the two risky assets and show that the sign of the covariance is necessary and sufficient to set the relative investments in the two risky assets of the portfolio for all concave utility functions. One application of our result concerns derivatives with linear payoffs. We also show how our model is related to the mutual fund separation condition proposed by Ross (1978).

Keywords: Optimal financial portfolio; covariance; separation condition; regression dependence (search for similar items in EconPapers)
JEL-codes: D80 G11 G12 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2000-12-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risksresearch.com/_files/ugd/a6eed3_bc ... 9eb1fd4f17a162d2.pdf Full text (application/pdf)

Related works:
Working Paper: Optimal Financial Portfolio and Dependence of Risky Assets (2000)
Working Paper: Optimal Financial Portfolio and Dependence of Risky Assets (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2000_012

Access Statistics for this paper

More papers in Working Papers from HEC Montreal, Canada Research Chair in Risk Management Contact information at EDIRC.
Bibliographic data for series maintained by Claire Boisvert ().