Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns
Portfolio Management
2025-12-17 v2 Risk Management
Abstract
An analytical solution to single-horizon asset allocation for an investor with a piecewise-linear utility function, called herein the "budget threshold utility," and exogenous position limits is presented. The resulting functional form has a surprisingly simple structure and can be readily interpreted as representing the addition of a simple "risk cost" to otherwise frictionless trading.
Cite
@article{arxiv.2512.11666,
title = {Risk Limited Asset Allocation with a Budget Threshold Utility Function and Leptokurtotic Distributions of Returns},
author = {Graham L Giller},
journal= {arXiv preprint arXiv:2512.11666},
year = {2025}
}
Comments
8 pages, 4 figures, 13 references