Diversified Portfolios with Jumps in a Benchmark Framework

Eckhard Platen ()

No 129, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper considers diversifed portfolios in a sequence of jump diffusion market models. Conditions for the approximation of the growth optimal portfolio (GOP) by diversified portfolios are provided. Under realistic assumptions, it is shown that diversified portfolios approximate the GOP without requiring any major model specifications. This provides a basis for systematic use of diversified stock indices as proxies for the GOP in derivative pricing, risk management and portfolio optimization.

Keywords: benchmark model; growth optimal portfolio; diversified portfolio (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-06-01
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as: Platen, E., 2004, "Diversified Portfolios with Jumps in a Benchmark Framework", Asia-Pacific Financial Markets, 11(1), 1-22.

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Journal Article: Diversified Portfolios with Jumps in a Benchmark Framework (2004)
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