Optimal multivariate financial decision making
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
Dokumenter
- Fulltext
Accepteret manuskript, 1,02 MB, PDF-dokument
Agents who pursue optimal portfolio choice by optimizing a univariate objective (e.g., an expected utility) obtain optimal payoffs that are increasing with each other (situation of no diversification). This situation may lead to an undesirable level of systemic risk for society. A regulator may consider a global perspective and aim to enforce diversification among the various portfolios by optimizing a suitable multivariate objective. We explain that optimal solutions satisfy a notion of multivariate cost-efficiency and provide an algorithm to obtain multivariate cost-efficient payoffs. We also assess the cost of diversification and provide the strategy that the regulator should pursue for obtaining the desired level of diversification.
| Originalsprog | Engelsk |
|---|---|
| Tidsskrift | European Journal of Operational Research |
| Vol/bind | 307 |
| Udgave nummer | 1 |
| Sider (fra-til) | 468-483 |
| ISSN | 0377-2217 |
| DOI | |
| Status | Udgivet - 2023 |
Bibliografisk note
Funding Information:
For helpful comments, we thank Moris Strub and seminar participants at the Research in Options 2020 meeting, the UNSW School of Risk & Actuarial Seminars, the One World Actuarial Research Seminars, the 5th PKU-NUS Annual International Conference on Quantitative Finance and Economics, the IME 2021 online edition, the Virtual Workshop on New Challenges in Quantitative Finance organized by CRM, the EGRIE 2021 online edition, the 2nd SUSTech Workshop on Financial Engineering 2022, the SIAM Financial Mathematics and Engineering online seminars, the St. Gallen I.VW research seminar, the AFFI and ARIA 2022 annual meetings. C. Bernard and S. Vanduffel acknowledge funding from FWO.
Funding Information:
For helpful comments, we thank Moris Strub and seminar participants at the Research in Options 2020 meeting, the UNSW School of Risk & Actuarial Seminars, the One World Actuarial Research Seminars, the 5th PKU-NUS Annual International Conference on Quantitative Finance and Economics, the IME 2021 online edition, the Virtual Workshop on New Challenges in Quantitative Finance organized by CRM, the EGRIE 2021 online edition, the 2nd SUSTech Workshop on Financial Engineering 2022, the SIAM Financial Mathematics and Engineering online seminars, the St. Gallen I.VW research seminar, the AFFI and ARIA 2022 annual meetings. C. Bernard and S. Vanduffel acknowledge funding from FWO.
Publisher Copyright:
© 2022 Elsevier B.V.
ID: 323556274