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Portfolio Optimization for Credit-Risky Assets under Marshall–Olkin Dependence

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  • Jan-Frederik Mai

Abstract

We consider power/logarithmic utility maximization in a multivariate Black–Scholes model that is enhanced by credit risk via the Marshall–Olkin exponential distribution. On the practical side, the model results in an enhancement of the mean variance paradigm, which is easy to interpret and implement. On the theoretical side, the model constitutes a well-justified and intuitive mathematical wrapping to study the effect of extreme and higher-order dependence on optimal portfolios.

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  • Jan-Frederik Mai, 2019. "Portfolio Optimization for Credit-Risky Assets under Marshall–Olkin Dependence," Applied Mathematical Finance, Taylor & Francis Journals, vol. 26(6), pages 598-618, November.
    • Handle: RePEc:taf:apmtfi:v:26:y:2019:i:6:p:598-618
    DOI: 10.1080/1350486X.2020.1727755
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