On minimising a portfolio's shortfall probability
Probability
2017-05-04 v8 Portfolio Management
Abstract
We obtain a lower asymptotic bound on the decay rate of the probability of a portfolio's underperformance against a benchmark over a large time horizon. It is assumed that the prices of the securities are governed by geometric Brownian motions with the coefficients depending on an economic factor, possibly nonlinearly. The economic factor is modelled with a general Ito equation. The bound is shown to be tight. More specifically, epsilon-optimal portfolios are obtained under additional conditions.
Keywords
Cite
@article{arxiv.1602.02192,
title = {On minimising a portfolio's shortfall probability},
author = {Anatolii A. Puhalskii and Michael Jay Stutzer},
journal= {arXiv preprint arXiv:1602.02192},
year = {2017}
}