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Optimal portfolio formulas for some mean-reverting price models

Author

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  • Srdjan Stojanovic

    (Department of Mathematical Sciences, University of Cincinnati, Cincinnati, Ohio 45221, USA;
    Center for Financial Engineering, Soochow University, Suzhou, Jiangsu 215006, P. R. China)

Abstract

Merton's optimal portfolio problem is solved, i.e., optimal portfolio formulas are derived for some new underlying price models of mean reversion type. The mean-reversion price models are proposed as an alternative to the well-known log-normal type and related models, possibly for a situation when an investor has a strong point of view about the future price-evolution.

Suggested Citation

  • Srdjan Stojanovic, 2014. "Optimal portfolio formulas for some mean-reverting price models," Journal of Financial Engineering (JFE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 1-19.
    • Handle: RePEc:wsi:jfexxx:v:01:y:2014:i:02:n:s2345768614500147
    DOI: 10.1142/S2345768614500147
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    References listed on IDEAS

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    1. CHUKWUOGOR-NDU, Chiaku & FERIDUN, Mete, 2006. "N Econometric Investigation Of The Day-Of-The-Week Effect And Returns Volatility In Fifteen Asia Pacific Financial Markets (1998-2003)," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
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