Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10523977 | Operations Research Letters | 2013 | 7 Pages |
Abstract
To examine the variance reduction from portfolios with both primary and derivative assets we develop a mean-variance Markovitz portfolio management problem. By invoking the delta-gamma approximation we reduce the problem to a well-posed quadratic programming problem. From a practitioner's perspective, the primary goal is to understand the benefits of adding derivative securities to portfolios of primary assets. Our numerical experiments quantify this variance reduction from sample equity portfolios to mixed portfolios (containing both equities and equity derivatives).
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Discrete Mathematics and Combinatorics
Authors
Sean W. Jewell, Yang Li, Traian A. Pirvu,